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Marine Living Resources Fund

2018-2019 AnnualReport

MARINE LIVING RESOURCES FUND


Department of Agriculture, Forestry and FisheriesPrivate Bag X350, Pretoria, 0001Tel: 012 319 6000www.daff.gov.za

Cape Town OfficePrivate Bag X2, Vlaeberg, 8018 Tel: 021 402 3911Fax: +27 21 402 3364www.daff.gov.za

Design and Layout: Directorate Communications (Fisheries Branch, Cape Town)

Photographs courtesy of: Department of Agriculture, Forestry and Fisheries (DAFF), Rob Tarr

ISBN: 978-0-621-47842-6 RP394/2018

ACRONYMS

AED Aquaculture and Economic DevelopmentBCC Benguela Current CommissionCAF Consultative Advisory ForumCCAMLR Commission for the Conservation of Antarctic Marine Living ResourcesCCSBT Commission for the Conservation of Southern Bluefin TunasDAFF Department of Agriculture, Forestry and FisheriesDPME Department of Planning, Monitoring and EvaluationEC Eastern CapeEIA Environmental Impact AssessmentFCO Fishery Control OfficerFRD Fisheries Research and DevelopmentFOS Fisheries Operations SupportFPE Fish Processing EstablishmentFPV Fishery Patrol VesselFRAP Fishing Rights Allocation ProcessFTC Fisheries Transformation CouncilFTE Full Time EquivalentICCAT International Commission for the Conservation of Atlantic TunasIOTC Indian Ocean Tuna CommissionKZN KwaZulu NatalMCS Monitoring, Control and SurveillanceMLRA Marine Living Resources ActMLRF Marine Living Resources FundMRM Marine Resource ManagementMTEF Medium Term Expenditure FrameworkNEDLAC National Economic Development and Labour CouncilSEAFO South East Atlantic Fisheries OrganisationSEIAS Socio-economic Impact Assessment SystemSG Strategic GoalSO Strategic ObjectiveTAC Total Allowable CatchTAE Total Allowable EffortWC Western CapeWCRL West Coast Rock LobsterWfFP Working for Fisheries Programme


Foreword by DG/Accounting Authority

Annual Report 2018/2019

Minister of Agriculture, Land Reform and Rural DevelopmentMinister of Environment, Forestry and Fisheries

In terms of section 55(3) of the Public Finance Management Act (PFMA), the Accounting Authority of a Public Entity must submit the annual report with audited financial statements, for tabling to Parliament, to the relevant Executive Authority.

In terms of the current National Macro Organisation of the State and Government, the Fisheries function and the Marine Living Resources Fund are in transition from the former Department of Agriculture, Forestry and Fisheries to the newly established Department of Environment, Forestry and Fisheries. I am therefore submitting the audited financial statements to both affected Executive Authorities, for tabling to Parliament.

In my capacity as both the Accounting Authority of the Marine Living Resources Fund and the Accounting Officer of the De-partment of Agriculture, Forestry and Fisheries as the designated department, I hereby formally submit to you, as Executive Authorities, the Annual Report with the audited financial statements and performance information for the MLRF for the 2018/2019 financial year.

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Mike MlenganaDirector-General and Accounting AuthorityDepartment of Agriculture, Forestry and Fisheries

Date: 29 July 2019


CONTENTS

Part A: ...................................................................................................................................................... 1

Executive Summary ............................................................................................................................ 3

Statement of Responsibility .............................................................................................................. 7

Report of the Audit Committee ................................................................................................... 11

Report of the Auditor-General ...................................................................................................... 15

Report of the Accounting Authority ............................................................................................ 25

Part B: .................................................................................................................................................... 29

Performance Information ................................................................................................................ 31

Annual Service Deliver Improvement Plan Progress Report .................................................. 43

Part C: ................................................................................................................................................... 51

Annual Financial Statements ........................................................................................................... 53

Part A

1

ExecutiveSummary

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4


EXECUTIVE SUMMARY

The Marine Living Resources Fund (MLRF) finances the operations of the Fisheries Branch which, during the period under review, fell under the Department of Agriculture, Forestry and Fisheries. The Fisheries Branch/MLRF is responsible for the development and sustainable use of South Africa’s fisheries and aquaculture sectors.

The MLRF (or Fisheries Branch) comprises of six sub-programmes, namely Aquaculture and Economic Development, Fisher-ies Research and Development; Marine Resource Management, Monitoring, Control and Surveillance, Fisheries Operations Support and Financial Management.

The MLRF had eighteen annual targets in its 2018-2019 Annual Performance Plan and one target falling under the Working for Fisheries Programme. The MLRF achieved nine of the eighteen targets.

The performance highlights are as follows:

• 16 aquaculture projects were supported under Operation Phakisa (Ocean’s Economy).

• 3 new aquaculture research studies were successfully conducted, namely a study on the economics of Sea Urchins; a study on animal health (Epizootic Ulcerative Syndrome) and a project on the assessment of temperature, deoxygen-ation and acidification on aquaculture,

• The Fishing Rights Allocation Process (FRAP) appeals processes in the Netfish, KZN Beach-Seine; Seaweed; Hake Inshore Trawl, Horse Mackerel and West Coast Rock Lobster (Nearshore and Offshore) were completed and Regu-lation 5(3) reports were compiled.

• Research reports to indicate stock levels and TAC/TAE recommendations were compiled for abalone and West Coast Rock Lobster.

• A total of 91 joint operations were conducted with partners, including under Initiative 5 of Operation Phakisa.

• A total of 4 698 compliance and enforcement measures were implemented in the six prioritised fisheries sectors, namely hake, abalone, rock lobster, linefish, pelagic and squid.

• A total of 281 investigations were conducted in terms of the Marine Living Resources Act.

Although the MLRF was not able to meet its target of allocating fishing rights to small-scale cooperatives in all four coastal provinces, rights were successfully allocated in the Northern Cape, and rights will be allocated in the Western Cape, KZN and Eastern Cape in the coming financial year.

The MLRF was also not able to achieve its objective of developing an Implementation Plan for the Aquaculture Development Bill/Act, as this piece of legislation has not yet been signed into law. The Bill is currently within the parliamentary process where it will hopefully be approved by the Sixth Administration.

The MLRF did not realise its objectives of allocating commercial fishing rights in the abalone fishery or of revising the policies and application forms for the 12 fishing sectors in which rights expire during the course of 2020 (FRAP 2020). The Branch, has however, granted an exemption in the abalone fishery to allow harvesting to continue and has completed Phase 1 of the Socio-Economic Impact Analysis for the General Policy on the Management and Allocation of Fishing Rights.

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EXECUTIVE SUMMARY (continued)

The MLRF received a disclaimed audit opinion. This is a further regression in terms of audit outcomes from the previous financial year. Management notes the comments of the Auditor-General that significant internal control deficiencies exist within the entity which resulted in the disclaimed audit opinion. Furthermore, it is noted that leadership did not provide adequate oversight in the implementation of mitigation plans to address prior year findings, and that critical vacancies in key positions, particularly in the Chief Directorate: Financial Management, resulted in non-compliance with the PFMA and other applicable legislation, and that further, the entity needs to strengthen its management of risk, consequence management and its internal control environment.

The Fisheries function and the Marine Living Resources Act are in the process of being transferred to the newly established Department of Environment, Forestry and Fisheries. It will therefore be incumbent on the new Accounting Authority and Executive of this Department to develop a Turn-Around Strategy and Action Plan to address the audit findings and control deficiencies mentioned in the Auditor-General’s report, with particular attention to be given to prior year findings.

Notwithstanding the disclaimed audit report, Management of the Entity would like to acknowledge the attempts by the Ex-ternal Audit Committee to work with management to prepare it financial statements and performance information reports, and thank them for the oversight role played throughout the financial year. The MLRF would like extend a particular vote of thanks to the three audit committee members whose second term of office expired in July 2018 for walking the long road with the Entity. Management would also like to express its gratitude to the Internal Audit Team for the value-adding internal audit work and reports performed during the year under review.

Finally, Management would like to extend its thanks and appreciation to the team of the Auditor-General and National Trea-sury for their patience, guidance, hard work and support provided during the review period.

Statement of Responsibility

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8


STATEMENT OF RESPONSIBILITYFor the year ended 31 March 2019

The Public Finance Management Act, 1999 (Act No. 1 of 1999), as amended, requires the accounting authority to ensure that the Marine Living Resources Fund keeps full and proper records of its financial affairs. The annual financial statements should fairly present the state of affairs of the Marine Living Resources Fund, its financial results, its performance against predetermined objectives and its financial position at the end of the year in terms of the basis of accounting as set out in note 1 to the financial statements.

The annual financial statements are the responsibility of the Accounting Authority. The Auditor-General is responsible for independently auditing and reporting on the financial statements. The Auditor-General has audited the entity’s financial state-ments and the Auditor-General’s report appears on pages 15-24

The annual financial statements have been prepared in accordance with the basis of accounting as set out in note 1 to the financial statements. These annual financial statements are based on appropriate accounting policies, supported by reasonable and prudent judgements and estimates.

The Accounting Authority has reviewed the Entity’s budgets and cash flow forecasts for the year ended 31 March 2019. On the basis of this review, and in view of the current financial position, the Accounting Authority has every reason to believe that the Entity will be a going concern in the year ahead and has continued to adopt the going concern basis in preparing the financial statements.

The Accounting Authority sets standards to enable management to meet the above responsibilities by implementing systems of internal control and risk management that are designed to provide reasonable, but not absolute, assurance against material misstatements and losses. The Entity maintains internal financial controls to provide assurance regarding:

• The safeguarding of assets against unauthorised use or disposition.• The maintenance of proper accounting records and the reliability of financial information used within the business

or for publication.

The controls contain self-monitoring mechanisms, and actions are taken to correct deficiencies as they are identified. The Accounting Authority has reviewed the Entity’s systems of internal control and risk management for the period from 1 April 2018 to 31 March 2019. The Accounting Authority is of the opinion that the Entity’s systems of internal control and risk management were effective for the period under review.

In the opinion of the Accounting Authority, based on the information available to date, the annual financial statements fairly present the financial position of the fund at 31 March 2019 and the results of its operations and cash flow information for the year and that the Code of Corporate Practices and Conduct has been adhered to.

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STATEMENT OF RESPONSIBILITY (continued)For the year ended 31 March 2019

The annual financial statements for the year ended 31 March 2019, set out on pages 51-96, were submitted for auditing on 31 May 2019 in terms of section 55(1)(c)(i) & (ii) of the PFMA, 1999 (Act No. 1 of 1999) and approved on 31 July 2019 by the Ac-counting Authority in terms of section 51(1)(f) of the PFMA (Act No 1 of 1999), as amended and are signed on its behalf by:

Deputy Director: Financial ManagementMarine Living Resources Fund Date: 29 July 2019

pp

Siphokazi NdudaneDeputy Director-General: Fisheries ManagementDate: 29 July 2019

pp

Mike MlenganaDirector-General and Accounting AuthorityDepartment of Agriculture, Forestry and FisheriesDate: 29 July 2019

NOTES

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Report of the Audit Committee

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REPORT OF THE AUDIT COMMITTEE 1. Legislative Requirements.

The Audit Committee herewith presents its report for the financial year ended 31 March 2019, as required by the Treasury Regulation paragraphs 3.1 with section 77 of the Public Finance Management Act, 1999.

2. Audit Committee Members and Attendance

The Audit Committee consists of members listed hereunder and should meet at least four times per annum as per its ap-proved terms of reference.

The Audit Committee held six (6) meetings during the year under review.

Name of members Ordinary meetings

Ms Thebi Moja (Audit Committee Chairperson) 1 2

Ms. Lahlang Somo (Audit Committee Member) 1 2

Ms Ntombi Mnconywa (Audit Committee Member) 1 2

Mr Ameen Amod (Audit Committee Chairperson)2 6

Mr Sulaiman Badat (Audit Committee Member) 6

Ms Zelda Tshabalala (Audit Committee Member)3 4

Adv. Lufuno Tokyo Nevondwe (Audit Committee Member)3 4

Ms Reyhana Gani (Audit Committee Member)3 4

Term expired on 31 July 2018.1. Appointed Chairperson from 14 November 2018.2. Appointed from 1 August 2018.

3. Audit Committee Responsibility

The Audit Committee reports that it has executed its responsibilities arising from section 38 (1) (a) (ii) of the Public Finance Management Act and paragraph 3.1 of the Treasury Regulations

The Committee also reports that it has adopted appropriate formal terms of reference as its Audit Committee Charter, has regulated its affairs in compliance with this charter, and has discharged all its responsibilities as contained therein.

4. The Effectiveness of Internal Control

In line with the Public Finance Management Act of 1999, Internal Audit provides the Audit Committee and management with assurance that the internal controls are appropriate and effective. This is achieved by evaluating internal controls to deter-mine their effectiveness and efficiency, and develop recommendations for enhancement. The Accounting Authority retains the responsibility for implementing such recommendations as per Treasury Regulation 3.1.12.

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REPORT OF THE AUDIT COMMITTEE (continued)

From the various reports of the Internal Auditors and the Audit Report of Auditor General South Africa (AGSA) it was noted that matters were reported indicating material deficiencies in the system of internal controls in areas pertaining to financial reporting, irregular, fruitless and wasteful expenditure, compliance with laws and regulations.

The Audit Committee has drawn the attention of Management to issues that have been raised in the previous year audit re-port and management report of the Auditor General South Africa (AGSA) as well as matters raised in the reports of Internal Audit in the current financial year. Based on our interaction with the Entity, we conclude that the audit action plan system has not been implemented adequately and effectively to address internal and external audit findings.

The Entity has limited capacity to address internal control systems deficiencies in an effective manner. The post of the Chief Director Finance who is responsible to execute the Chief Financial Officer’s responsibilities, has been vacant for a long time. The financial and reporting systems of internal controls were therefore not adequate and effective during the year under review.

The Audit Committee remains concerned with the slow progress in the investigation of irregular, fruitless and wasteful expenditure. The current status of implementation of the guideline(s) as issued by National Treasury to resolve irregular, fruitless and wasteful expenditure is inadequate.

5. Risk Management

The Entity allocated some of its Internal Audit resources to develop its strategic risk registers, culminating in some im-provement in Enterprise Risk Management. The Audit Committee advises the Accounting Authority to continue the risk management journey by the development of operational risk registers, and the active further development of the Enterprise Risk Management environment.

6. In-Year Monitoring and Monthly/Quarterly Report

The Entity has been reporting monthly and quarterly to the National Treasury as is required by the PFMA. The Audit Com-mittee expressed concern over the content and quality of the monthly / quarterly financial reports prepared by the Entity during the year under review. 7. Evaluation of Financial Statements

The Audit Committee has reviewed the audited Annual Financial Statements prepared by the Entity.The Audit Committee concurs and accept the Disclaimer opinion of Auditor General South Africa on the Financial State-ments.

The Audit Committee recommends that the audit report be read with the Annual Report of the Entity.

8. Internal Audit

The Accounting Authority is obliged, in terms of the Public Finance Management Act, 1999, to ensure that the entity has an effective system of Internal Audit under the control and direction of the Audit Committee. The Audit Committee is satisfied that the Internal Audit Function has properly discharged its functions and responsibilities during the year under review. The Internal Audit has provided effective support to the Audit Committee and Management throughout the year.


REPORT OF THE AUDIT COMMITTEE (continued)

The Audit Committee is satisfied that the Internal Audit Function maintains an effective internal quality assurance program that covers all aspects of the Internal Audit activity.

The table below, lists the Internal Audit plans completed during the year:

No. Audit projects Audit Rating

1. Operations (Monitoring, Control and Surveillance) Some improvement Needed

2. Records Management Review Major Improvement Needed

3. Stock Management Review Unsatisfactory

4. Asset Management Major Improvement Needed

5. Audit of Predetermined Objectives (Q2) Some improvement Needed

6. IT Access Controls Some improvement Needed

7. Internal Financial Controls Audit cancelled due to delays in financial statement processes and was replaced with an audit in the 2019/20 Internal Audit plan.

9. Auditor-General’s Report The Audit Committee has met with the representatives of Auditor General South Africa (AGSA) to ensure that there are no unresolved issues.

The AGSA expressed a Disclaimer audit opinion regarding the Annual Financial Statements.

10. Appreciation

I will like to thank the Audit Committee members for their contributions and constructive meetings we held.

The Audit Committee expresses its sincere appreciation to the Director-General of the Department of Agriculture, Forestry and Fisheries as the Accounting Authority of Marine Living Resource Fund, the Management of Marine Living Resource Fund, Internal Audit and the AGSA for their support and co-operation during the year under review.

Ameen Amod (CD) SAChairperson of the Audit CommitteeMarine Living resource Fund12th August 2019

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Report of the Auditor-General

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REPORT OF THE AUDITOR-GENERAL TO PARLIAMENT ONTHE MARINE LIVING RESOURCES FUND

Report on the audit of the financial statements

Disclaimer of opinion

1. I was engaged to audit the financial statements of the Marine Living Resources Fund set out on pages 3 to 45, which comprise the statement of financial position as at 31 March 2019, the statement of financial performance, statement of changes in net assets, cash flow statement and statement of comparison of budget and actual amounts for the year then ended, as well as the notes to the financial statements, including a summary of significant accounting policies.

2. I do not express an opinion on the financial statements of the entity. Because of the significance of the matters described in the basis for disclaimer of opinion section of this auditor’s report, I was unable to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these financial statements.

Basis for disclaimer of opinion

Plant and equipment

3. I was unable to obtain sufficient appropriate audit evidence for plant and equipment, as I could not physically verify assets listed on the asset register at the premises of the public entity. I was unable to confirm these physical assets by alternative means. Consequently, I was unable to determine whether any adjustments were necessary to plant and equipment stated at R298,8 million (2017-18: R317,6 million). Additionally, I am unable to determine the impact on depreciation, accumulated depreciation, total expenditure, the deficit for the period and on accumulated surplus.

4. The useful lives of plant and equipment were not reviewed at each reporting date in accordance with GRAP 17, Property, plant and equipment. As a result, other assets with a gross carrying amount of R105,5 million (2017-18: R86,2 million) had a net carrying amount approximating zero while still being in use. I was unable to determine the impact on the net carrying amount of plant and equipment stated at R298,8 million in the financial statements as it was impracticable to do so. Additionally, I was unable to determine the impact on depreciation, accumulated depreciation, total expenditure, the deficit for the period and on accumulated surplus.

5. The public entity did not account for depreciation as required by GRAP 17 Property plant and equipment as a result of system errors. Consequently, I was unable to determine the impact on depreciation and amortisation expense stated at R26,2 million (2017-18: R27,0 million) in the statement of financial performance, accumulated depreciation and carrying amount of plant and equipment stated at R298,8 million in the financial statements.

6. The public entity did not recognise all items of plant and equipment in accordance with GRAP 17, Property, plant and equipment, as assets of a project where the agreement indicated that substantially all the risks and rewards incidental to ownership are with the public entity. I was unable to confirm the extent of such assets, by alternative means. Consequently, plant and equipment stated at R298,8 million was understated and the total expenditure stated at R759,7 million was overstated by an undetermined amount. Additionally, I was unable to determine the impact on impairment losses, depreciation and amortisation expense stated at R26,2 million, accumulated depreciation stated at R394,9 million total expenditure stated at R759,7 million, the deficit for the period stated at R47,6 million and on accumulated surplus stated at R350,1 million in the financial statements.

7. The public entity did not disclose previous period errors in note 18 to the financial statements, as required by GRAP 3,

Accounting policies, estimates and errors. The nature and the amount of the correction for each financial statement item affected, and the amount of the correction at the beginning of the earliest previous period were not disclosed for

restatements made to assets in the current reporting period, but which relates to comparative information. Additionally, there is also an impact on depreciation, accumulated depreciation, total expenditure, the

deficit for the period and on accumulated surplus.

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REPORT OF THE AUDITOR-GENERAL TO PARLIAMENT ONTHE MARINE LIVING RESOURCES FUND (continued)

Biological assets

8. Contrary to the requirements of GRAP 27, Agriculture the public entity did not disclose biological assets. A project, where the agreement indicated that substantially all the risks and rewards incidental to ownership are with the public entity, had an agricultural activity was not accounted for in the asset register. I was unable to confirm the extent of the biological assets by alternative means as it was impractical to do so. Additionally, I was unable to determine the impact on impairment losses, total assets stated at R683,5 million and on accumulated surplus stated at R350,1 million in the financial statements.

Inventory

9. I was unable to obtain sufficient appropriate evidence for the measurement and quantity of inventory at year end in terms of GRAP 12, Inventories, as a result of no inventory count that was performed by management at or after year end and therefore it was impracticable for the auditor to determine whether any adjustments were required to the inventory balance of R106,5 million as disclosed in the financial statements. Consequently, I was unable to determine the impact on inventory losses, total expenditure stated at R759,7 million, the deficit for the period stated at R47,6 million, total assets stated at R683, 584 million and on accumulated surplus stated at R350,1 million in the financial statements.

Trade and other payables

10. The public entity did not recognise trade payables in accordance with GRAP 104, Financial Instruments. Invoices, amounting to R23,1 million, for goods and services received before year end were incorrectly accounted for as an accrued expense, where it should have been accounted for as a trade payable.

Revenue

11. The public entity did not recognise all revenue (levy on fish products) in the correct reporting period in accordance with GRAP 9, Revenue from Exchange Transactions and GRAP 1, Presentation of financial statements. Transactions were processed in the 2018-19 reporting period whereas the supporting evidence indicated that it related to the 2016-17 or 2017-18 reporting period. Consequently, revenue for the current year is overstated by R8,8 million and revenue for the prior year understated by the same amount. Additionally, there is a resultant impact on total revenue, the deficit for the period and on accumulated surplus.

Expenditure

12. I was unable to obtain sufficient appropriate audit evidence for vessel operating costs as sufficient and appropriate supporting evidence was not provided. I was unable to confirm the expenditure by alternative means. Consequently, I was unable to determine whether any adjustment was necessary to vessel operating costs amounting to R179,0 million in the statement of financial performance. I was also unable to determine the impact on realisation of conditional grants stated at R13,4 million, deferred income stated at

R247,7 million, the deficit for the period stated at R47,6 million and on accumulated surplus stated at R350,1 million in the financial statements.

13. The public entity did not present certain classes of expenses in terms of their nature, in the financial statements in

accordance with GRAP 1, Presentation of financial statements. Expense were grouped together, on the Statement of financial performance, as vessel operating costs, instead of those being grouped together with other similar classes of expenditure based on the nature of the expenditure it related to.

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14. The public entity did not present certain material classes of expenses separately, in the financial statements in accordance with GRAP 1, Presentation of financial statements. Expense were grouped together, on the Statement of financial performance, as other operational costs and the material items within other operational costs were not presented separately in the financial statements or in the notes to the financial statements.

15. Total revenue was misstated by R3,1 million and expenditure was misstated by R4,7 million due to the cumulative effect of individually immaterial uncorrected misstatements in the following items:

• Licences and permits stated at R30,5 million was overstated by R917 897• Realisation of conditional grants stated at R13,4 million was overstated by R2,2 million• Other operational costs stated at R127,1 million was overstated by R2,5 million• Transportation cost stated at R46,0 million was overstated by R2,1 million.

Disclosure: Financial instruments

16. The public entity did not disclose the credit quality of financial assets that are neither past due nor impaired and the carrying amount of financial assets that would otherwise be past due or impaired whose terms have been renegotiated in accordance with GRAP 104, Financial instruments.

Statement of comparison of budget and actual information

17. The public entity did not disclose reasons for variance for some material line items in note 23.1 to the financial statements, in accordance with GRAP 24, Presentation of budget Information in financial statements.

Irregular expenditure

18. The public entity did not include all irregular expenditure in note 21.2 to the financial statements, as required by section 55(2)(b)(i) of the Public Finance Management Act of South Africa, 1999 (Act no. 1 of 1999) (PFMA). This was due to payments made in contravention of the supply chain management requirements, resulting in an understatement of R15,6 million. Management’s processes did not allow for the quantification of the full extent of the irregular expenditure incurred and therefore, I was unable to confirm the extent of irregular expenditure to be disclosed, by alternative means. Consequently, I was unable to determine whether any further adjustments were necessary to the irregular expenditure balances of R183,3 million (2017-18: R172,2 million) disclosed.

Contingent liabilities

19. I was unable to obtain sufficient appropriate audit evidence for contingent liabilities, as not all external confirmations were received and estimate of possible losses is misstated by an unknown amount. I was unable to confirm whether all contingent liabilities were recorded by alternative means. Additionally, I was unable to determine the extent of the misstatement of possible losses by alternative means. Consequently, I was unable to determine whether any adjustments to contingent liabilities stated at R25,9 million in note 19 to the financial statements were necessary.

Emphasis of matters

20. I draw attention to the matters below. My opinion is not modified in respect of these matters.

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Restatement of corresponding figures

21. As disclosed in note 18 to the financial statements, the corresponding figures for 31 March 2018 were restated as a result of errors in the financial statements of the public entity at, and for the year ended, 31 March 2019.

Matters important to users of the financial statements

22. With reference to note 19 to the financial statements, the public entity is the defendant in various ongoing litigations and claims. The outcome of these cases cannot be presently determined and no provision for any liability that may result has been made in the financial statements.

Underspending of the conditional grant

23. As disclosed in note 7 to the financial statements, the public entity materially underspent the conditional grants received as a balance of R247,7 million (2017-18: R177,2 million) which represents 96,8% (2017-18: 68,1%) of the total grants received.

Responsibilities of accounting authority for the financial statements

24. The accounting authority is responsible for the preparation and fair presentation of the financial statements in accordance with SA Standards of GRAP and the requirements of the PFMA, and for such internal control as the accounting authority determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

25. In preparing the financial statements, the accounting authority is responsible for assessing the Marine Living Resources Fund’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless the appropriate governance structure either intends to liquidate the public entity or to cease operations, or has no realistic alternative but to do so.

Auditor-general’s responsibilities for the audit of the financial statements

26. My responsibility is to conduct an audit of the financial statements in accordance with the International Standards on Auditing and to issue an auditor’s report. However, because of the matters described in the basis for disclaimer of opinion section of this auditor’s report, I was unable to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these financial statements.

27. I am independent of the public entity in accordance with sections 290 and 291 of the International Ethics Standards

Board for Accountants’ Code of ethics for professional accountants and parts 1 and 3 of the International Ethics Standards Board for Accountants’ International code of ethics for professional accountants (including International Independence Standards) (IESBA codes) as well as the ethical requirements that are relevant to my audit in South Africa. I have fulfilled my other ethical responsibilities in accordance with these requirements and the IESBA codes.

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Report on the audit of the annual performance report

Introduction and scope

28. In accordance with the Public Audit Act of South Africa, 2004 (Act No. 25 of 2004) (PAA) and the general notice issued in terms thereof, I have a responsibility to report material findings on the reported performance information against predetermined objectives for selected programmes presented in the annual performance report. I performed procedures to identify findings but not to gather evidence to express assurance.

29. My procedures address the reported performance information, which must be based on the approved performance planning documents of the public entity. I have not evaluated the completeness and appropriateness of the performance indicators included in the planning documents. My procedures also did not extend to any disclosures or assertions relating to planned performance strategies and information in respect of future periods that may be included as part of the reported performance information. Accordingly, my findings do not extend to these matters.

30. I evaluated the usefulness and reliability of the reported performance information in accordance with the criteria developed from the performance management and reporting framework, as defined in the general notice, for the following selected Strategic goals presented in the annual performance report of the public entity for the year ended 31 March 2019:

Programmes Pages in the annual performance report

Strategic goal 2 – Enhanced production, employment and economic growth in the sector 9 – 14

Strategic goal 3 – Enable environment for food security and sector transformation 10 and 15 to 17

Strategic goal 4 – Sustainable use of natural resources in the sector 10 to 11 and 17 to 19

31. I performed procedures to determine whether the reported performance information was properly presented and whether performance was consistent with the approved performance planning documents. I performed further procedures to determine whether the indicators and related targets were measurable and relevant, and assessed the reliability of the reported performance information to determine whether it was valid, accurate and complete.

32. The material findings in respect of the usefulness of the selected programmes are as follows:

Strategic goal 2 – Enhanced production, employment and economic growth in the sector

Indicator 2.1.3 “Aquaculture Development Act developed and implemented as per Operation Phakisa”

33. There was no clear and logical link between the indicator, Aquaculture Development Act developed and implemented as per Operation Phakisa, and the planned target, Aquaculture Development Bill/Act implementation plan, to which it relates. The indicator relates to the development and implementation of an Act, where the target refers to an implementation plan.

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Strategic goal 3 – Enable environment for food security and sector transformation

Indicator 3.1.1 (c) “Commercial fishing rights allocated”

34. The source of information for achieving the planned indicator was not clearly defined as the technical indicator description for the indicator referred to “support” but “support’ was not defined.

35. The planned target, Suport the (FRAP 2015/16) appeals process, for this indicator was not specific in clearly identifying the nature and required level of performance as the source of collection of data, related to informing the Minister of appeals filed against the MLRF in line with regulation 5(3) of the Marine Living Resources Act,1998 (Act no.18 of 1998), (MLRA) where the actual achievement related to where the Minister making decisions on whether the appeals is valid or not.

36. The planned target, Support the (FRAP 2015/16) appeals process, for this indicator was not measurable and time bound as the planned target did not include any measurement of how many regulation 5(3) of the MLRA reports should be produced and by when it must be produced, whether in draft or finalised.

37. I did not raise any material findings on the reliability of the reported performance information for the below strategic goals:

• Strategic goal 2 – Enhanced production, employment and economic growth in the sector• Strategic goal 3 – Enable environment for food security and sector transformation

38. I did not raise any material findings on the usefulness and reliability of the reported performance information for the below strategic goal:

• Strategic goal 4 – Sustainable use of natural resources in the sector Other matters

39. I draw attention to the matters below.

Achievement of planned targets

40. Refer to the annual performance report on pages 9 to 19 for information on the achievement of planned targets for the year and explanations provided for the under/overachievement of the number of targets. This information should be considered in the context of the material findings on the usefulness of the reported performance information in paragraphs 41 to 44 of this report.

Adjustment of material misstatements

41. I identified material misstatements in the annual performance report submitted for auditing. These material misstatements were on the reported performance information of Strategic goal 2 – Enhance production, employment and economic growth in the sector. As management subsequently corrected only some of the misstatements, I raised material findings on the usefulness of the reported performance information. Those that were not corrected are reported above.

22



Report on the audit of compliance with legislation

Introduction and scope

42. In accordance with the PAA and the general notice issued in terms thereof, I have a responsibility to report material findings on the compliance of the public entity with specific matters in key legislation. I performed procedures to identify findings but not to gather evidence to express assurance.

43. The material findings on compliance with specific matters in key legislations are as follows:

Annual financial statements

44. The financial statements submitted for auditing were not prepared in accordance with the prescribed financial reporting framework and supported by full and proper records, as required by section 55(1) (a) and (b) of the PFMA.

45. Material misstatements identified by the auditors in the submitted financial statements were not adequately corrected and the supporting records could not be provided subsequently, which resulted in the financial statements receiving a disclaimer of opinion.

Expenditure management

46. Effective and appropriate steps were not taken to prevent irregular expenditure, as required by section 51(1)(b)(ii) of the PFMA. As reported in the matters affecting the auditor’s report the value disclosed in note 21.2 of the financial statements does not reflect the full extent of the irregular expenditure incurred. The majority of the irregular expenditure disclosed in the financial statements was caused by the non-compliance with the Treasury regulations, where appropriate supply chain management processes were not followed.

Consequence management

47. We were unable to obtain sufficient appropriate audit evidence that disciplinary steps were taken against officials who had incurred irregular expenditure as required by section 51(1)(e)(iii) of the PFMA. This was due to proper and complete records that were not maintained as evidence to support the investigations into irregular expenditure.

48. We were unable to obtain sufficient appropriate audit evidence that disciplinary steps were taken against some officials who had incurred fruitless and wasteful expenditure as required by section 51(1)(e)(iii) of the PFMA. This was due to proper and complete records that were not maintained as evidence to support the investigations into fruitless and wasteful expenditure.

Procurement and contract management

49. The bid documentation for procurement of commodities designated for local content and production, did not stipulated the minimum threshold for local production and content as required by the 2017 preferential procurement regulation 8(2). Similar non-compliance was also reported in the prior year.

50. Some goods and services of a transaction value above R500 000 were procured without inviting competitive bids, as required by treasury regulations 16A6.4 Similar non-compliance was also reported in the prior year.

23



Other information

51. The accounting authority is responsible for the other information. The other information comprises the information included in the annual report. The other information does not include the financial statements, the auditor’s report and those selected strategic goals presented in the annual performance report that have been specifically reported in this auditor’s report.

52. My opinion on the financial statements and findings on the reported performance information and compliance with legislation do not cover the other information and I do not express an audit opinion or any form of assurance conclusion thereon.

53. In connection with my audit, my responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements and the selected strategic objectives presented in the annual performance report, or my knowledge obtained in the audit, or otherwise appears to be materially misstated.

54. As a result of the disclaimer of opinion expressed on the financial statements, I do not conclude on material misstatements of the other information relating to the financial statements. If, based on the work I have performed relating to the audit of performance information and compliance with legislation, I conclude that there is a material misstatement of this other information, I am required to report that fact.

55. I have nothing to report in this regard.

Internal control deficiencies

56. I considered internal control relevant to my audit of the financial statements, reported performance information and compliance with applicable legislation; however, my objective was not to express any form of assurance on it. The matters reported below are limited to the significant internal control deficiencies that resulted in the basis for the disclaimer of opinion, the findings on the performance report and the findings on compliance with legislation included in this report.

57. Leadership did not provide adequate oversight regarding the implementation of action plans to address prior year audit findings and internal control deficiencies which resulted in regression of audit opinion and repeat audit findings in the area of financial reporting, the report on pre-determined objectives and compliance with laws and regulations.

58. Management did not have adequate processes in place to ensure that a credible set of financial statements and annual performance report were prepared, in compliance with the relevant reporting frameworks, that these were supported by valid, accurate and complete supporting documents that are available when requested. This was due to key vacant positions in the finance and SCM units that were not filled for a significant period of time.

59. Deficiencies in review processes and the ineffective implementation of compliance monitoring controls to ensure compliance with key applicable legislation resulted in non-compliance with the PFMA and other applicable legislation resulting in unauthorised, irregular and fruitless and wasteful expenditure.

60. The entity did not implement effective systems of risk management to achieve the objectives of a strengthened inter-nal control environment and mitigate the risks of material misstatements in the financial statements and annual performance report and in non- compliance with laws and regulations.

24



Other reports 61. I draw attention to the following engagements conducted by various parties that had, or could have, an impact on

the matters reported in the public entity’s financial statements, reported performance information, compliance with applicable legislation and other related matters. These reports did not form part of my opinion on the financial statements or my findings on the reported performance information or compliance with legislation.

62. The Directorate for Priority Crime Investigation is presently investigating various allegations of fraud, corruption, money laundering, Contraventions of the PFMA and Treasury Regulations, within the Department of Agriculture, Forestry and Fisheries. These investigations are still in progress.

Cape Town 31 July 2019


Report of the Accounting Authority

25

26


REPORT OF THE ACCOUNTING AUTHORITYFor the year ended 31 March 2019

The Accounting Authority presents the annual report, which forms part of the audited financial statements of the Marine Living Resources Fund for the year ended 31 March 2019.

PRINCIPAL ACTIVITY OF THE FUND

The Marine Living Resources Fund (MLRF) is a Schedule 3A Public Entity established in terms of the Public Finance Manage-ment Act, 1999 (Act No. 1 of 1999) but it also operates as a Branch within the national Department of Agriculture, Forestry and Fisheries (Programme 6).

The MLRF and the Fisheries Management Branch (Fisheries) of the Department of Agriculture, Forestry and Fisheries (DAFF) is responsible for promoting the development and sustainable use of South Africa’s fisheries and aquaculture sectors. The Branch’s activities are governed by the Marine Living Resources Act of 1998, and the Branch operations are funded through the Marine Living Resources Fund.

EXECUTIVE OFFICERS:

Director-General: DAFF

MM Mlengana 1 April 2018 – 31 March 2019

Deputy Director-General: Fisheries Management S Ndudane 1 April 2018 – 13 June 2018B Semoli - Acting 15 June 2018 – 2 October 2018M Hlatshwayo – Acting 2 October 2018 – 01 November 2018S Ndudane 01 November 2018 – 31 March 2019

Acting Chief Director: Financial Management (MLRF)

N Parker 1 April 2018 – 5 July 2018W Rooifontein 3 September 2018 – 1 November 2018N Parker 7 November 2018 – 26 February 2019Vacant 26 February 2018 – 31 March 2019

During the reporting period both the Deputy Director-General: Fisheries Management and two of the Acting Chief Directors: Financial Management for the MLRF were placed on precautionary suspension. This resulted in some instability and changes in accountability for the Fund.

REMUNERATION OF EXECUTIVE OFFICERS

Compensation of the employees that administer the MLRF was paid by the Department of Agriculture, Forestry and Fish-eries (DAFF). The compensation of the executive officers is disclosed in the financial statements of DAFF and as a Related Parties in the MLRF financial statements.

During this financial year the MLRF did not disburse any amounts to Director-General.

27


REPORT OF THE ACCOUNTING AUTHORITYFor the year ended 31 March 2019 (continued)

The MLRF spent R530 994 for Ms S Ndudane for travel and accommodation costs and R91 308 for subsistence, cell phone and other related reimbursement costs).

The MLRF spent R162 032 on Mr Semoli for travel and accommodation costs. The Fund spent R53 381 on Dr Hlatshwayo for travel and accommodation costs and R21 058 for subsistence costs.

R76 476 was spent on the Acting Chief Director: Financial Management, Ms N Parker for travel and accommodation costs and R15 623 for cell phone, subsistence and other related costs.

GOVERNMENT DEPARTMENTDepartment of Agriculture, Forestry and Fisheries.

ADDRESS:Foretrust Building Private Bag X2Martin Hammerschlag Way Vlaeberg, Foreshore 8018Cape Town, 8000

LEGAL FORM

The entity is a schedule 3A Public Entity in terms of the Public Finance Management Act No 1 of 1999 and is governed by the Marine Living Resources Act No 18 of 1998 as amended.

LEGISLATIVE MANDATEThe mandate and core business of the Marine Living Resources Fund (MLRF), managed under the Fisheries Management Branch of The Department of Agriculture, Forestry and Fisheries (DAFF), is underpinned by the Constitution and all other relevant legislation and policies applicable to government departments.

The specific mandate of the MLRF is derived from the following Acts, Policies, Treaties and Conventions:

• Constitution of the Republic of South Africa, 1996• Sea Fisheries Act, Act 12 of 1988• Marine Living Resources Act, Act 18 of 1998• National Environmental Management Act, Act 107 of 1998• National Environmental Management Act: Integrated Coastal Management Act, Act 24 of 2008• Marine Pollution Act, Act 6 of 1981• Antarctic Treaties Act, Act 38 of 1994• World Heritage Convention Act, Act 1 of 1999• Public Finance Management Act, Act 1 of 1999• Public Service Act, Act 38 of 1994• Basic Conditions of Employment Act, Act 75 of 1997• Promotion of Access to Information Act, Act 2 of 2000• Promotion of Administrative Justice Act 3 Of 2000• National Treasury Regulations• Preferential Procurement Framework Act and regulations• Supply Chain Management Framework• Cabinet and Ministerial directives and policy decisions.

28


REPORT OF THE ACCOUNTING AUTHORITYFor the year ended 31 March 2019 (continued)

The Department of Agriculture, Forestry and Fisheries has established and implemented a system of internal control de-signed to provide reasonable assurance as to the integrity and reliability of the performance information.

The performance information provided in the annual report for the Marine Living Resources Fund, in my opinion, reflects the performance of the department for the financial year ended 31 March 2019.

Mike MlenganaDirector-GeneralDepartment of Agriculture, Forestry and FisheriesDate: 29 July 2019

29

Part B


Performance Information

31

32


PERFORMANCE INFORMATION

PERIOD UNDER REVIEW: 1 APRIL 2018- 31 MARCH 2019

The Marine Living Resources Fund (MLRF) was established in terms of Section 10 of the Marine Living Resources Act, Act 18 of 1998. The MLRF is the main source of funding for the operations of Fisheries Management, which is also a Branch of the National Department of Agriculture, Forestry and Fisheries (DAFF), under Programme 6.

Purpose Promote the development and sustainable use of South Africa’s fisheries and aquaculture sectors. The MLRF (or Fisheries Branch) comprises of six sub-programmes, namely Aquaculture and Economic Development, Fisheries Research and Development; Marine Resource Management, Monitoring, Control and Surveillance, Fisheries Operations Support and Financial Management. Aquaculture and Economic Development: ensures aquaculture growth and fisheries economic development for sustainable livelihoods by providing public support and an integrated platform for the management of aquaculture.

Fisheries Research and Development: To ensure the promotion of the sustainable development of fisheries resources and ecosystems by conducting and supporting appropriate research.

Marine Resource Management: Ensures the sustainable utilisation and equitable and orderly access to the marine living resources through improved management and regulations.

Monitoring, Control and Surveillance: Ensures the protection and promotion of sustainable use of marine living resources by intensifying enforcement and compliance efforts.

Fisheries Operations Support: The provision of support services in order to ensure the effective and efficient management and administration of the Branch: Fisheries Management and the Marine Living Resources Fund.

Financial Management: The provision of financial management for the Branch: Fisheries Management and the Marine Living Resources Fund.

During the current Medium Term Expenditure Framework (MTEF), the MLRF is committed to facilitating investment in production and infrastructure in support of the development of aquaculture; increase growth, income and sustainable job opportunities in the value-chain and increased market access; conducting research into aquaculture candidate species; to provide work opportunities and income support to poor and unemployed people through the Working for Fisheries Programme; maintaining the productivity of fish stocks and ecosystems; promoting transformation through the Fishing Rights Allocation processes; rolling out the Small-scale fisheries Policy but allocating fishing rights to small-scale coopera-tives; rebuilding prioritised fish stocks through the implementation of a stock recovery strategy for Hake, Abalone and West Coast Rock Lobster; to improve compliance, monitoring and enforcement efforts; and to make fisheries services more accessible to clients.

33


PERFORMANCE INFORMATION (continued)

Strategic Goals and Strategic Objectives

STRATEGIC GOALS STRATEGIC OBJECTIVES

Strategic goal 1Effective and efficient strategic leadership, governance and administration

Goal statement 1:Provide leadership and administrative support to achieve sector and organisational goals on accordance with prescribed frameworks

Strategic objective 1.1Strengthen the culture of compliance with statutory requirements and good governance practicesStrategic objective 1.2Strengthen the support, guidance and interaction with stakeholders in the sectorsStrategic objective 1.3Strengthen institutional mechanisms for integrated policy and planning in the sectors

Strategic goal 2Enhanced production, employment and economic growth in the sectors

Goal statement 2:Ensure profitable and safe production that contributes to increased market access

Strategic objective 2.1Advance APAP through increased production and productivity in prioritised value chainsStrategic objective 2.2Effective management of biosecurity and sector related risks Strategic objective 2.3Ensure support for market access and processing of agricultural, forestry and fisheries products

Strategic goal 3Enabling environment for food security and sector transformation

Goal statement 3:Lead and create an enabling environment for effective implementation of government food security initiatives aimed at improving the availability of food

Strategic objective 3.1Lead and coordinate government food security initiativesStrategic objective 3.2Enhance skills capacity for efficient delivery in the sectorsStrategic objective 3.3Strengthening planning, implementation and monitoring of comprehensive support programmes

Strategic goal 4Sustainable use of natural resources in the sectors

Goal statement 4:Ensure sustainable use of natural resources

Strategic objective 4.1Ensure the conservation, protection, rehabilitation and recovery of depleted and degraded natural resourcesStrategic objective 4.2Ensure appropriate responses to climate change through the implementation of effective prescribed frameworks

In terms of government’s outcomes-based performance management approach, the MLRF focuses mainly on the implementation of outcome 10 – Protected and Enhanced Environmental assets and Natural Resources as follows:

A total of 16 Operation Phakisa aquaculture projects were also supported by the DAFF, primarily through undertaking site visits, drafting reports and letter’s to the dti in line with the requirements for funding applications for the Aquaculture Development and Enhancement Programme. It should be noted that many of these projects, the new ones, are still awaiting a lease in Saldanha Bay from Transnet National Port Authority in order to implement. The Environmental Authorisation for the Saldanha Bay Aquaculture Development Zone was received by the DAFF in January 2018 and the upheld in June 2018 after it was appealed. The Aquaculture Development Bill was approved by the Cabinet on 02 May 2018, and it will be processed once the 6th Parliament rises.

34



Although DAFF has six strategic goals (SGs) and each SG comprises a number of strategic objectives (SOs), the Marine Living Resources Fund and Fisheries Branch report under Strategic Goals 2; 3 and 4 as follows:

SG 2: ENHANCE PRODUCTION, EMPLOYMENT AND ECONOMIC GROWTH IN THE SECTOR

SO 2.1: Ensure increased production and productivity in prioritised areas as well as value chains

STRAGEGIC OBJECTIVE INDICATOR 1: Increase the number of job opportunities under the Working for Fisheries Programme (WfFP) through creating 1 092 jobs – 601 female jobs (331 female youths and 12 females with disabilities; 491 male jobs (270 male youths and 10 males with disabilities) by ensuring the creation of 546 Full Time Equivalents in 2018-2019.

STRAGEGIC OBJECTIVE INDICATOR 2: Promote aquaculture for economic growth by 2020 through:• Supporting 4 Operation Phakisa (Ocean’s Economy) aquaculture projects.• Developing a concept note for small-scale aquaculture.• Developing an Aquaculture Development Bill/Act Implementation Plan.• Conducting 4 new aquaculture research studies

SG 3: ENABLING ENVIRONMENT FOR FOOD SECURITY AND SECTOR TRANSFORMATION

SO 3.1: Lead and coordinate government food security initiatives

STRAGEGIC OBJECTIVE INDICATOR: Promote transformation and production of fisheries by 2020 through:• Allocating fishing rights in the abalone sector.• Revising policies and application forms for 12 fishing sectors where rights expire in 2020.• Providing support to the FRAP 2015/2016 appeals process.• Allocating fishing rights to registered small-scale fisheries cooperatives.

SG 4: SUSTAINABLE USE OF NATURAL RESOURCES

SO 4.1: Ensure the conservation, protection, rehabilitation and recovery of depleted and degraded natural resources

STRAGEGIC OBJECTIVE INDICATOR: Promote, conserve, protect and recovery of depleted natural resources by 2020 through:• Developing and implementing recovery plans for 2 prioritised sectors, namely Abalone and West Coast Rock

Lobster• Compiling research reports and Total Allowable Catch/Effort (TAC/TAE) recommendations for 2 sectors, namely

west coast rock lobster and abalone.• Conducting 40 joint operations with enforcement partners through Operation Phakisa.• Conducting 4 500 compliance and enforcement measures in the 6 prioritised fisheries, namely hake, abalone, rock

lobster, line fish, pelagics and squid.• Conducting 280 investigations.

35



Achievement Highlights

The Fisheries Branch/MLRF was able to ensure the generation of Total Allowable Catch (TAC) and Total Allowable Effort (TAE) recommendations in all 22 of South Africa’s commercial fisheries. The process of finalising appeals in the 2015/2016 Fishing Rights Allocation Process (FRAP) is nearing completion, as only the Horse Mackerel appeals need to be completed. The allocation of rights in the Abalone fishery was postponed to form part of the fisheries that will be reallocated during FRAP2020.

The Fisheries Branch/MLRF has also commenced with preparations for the 2020 fishing rights allocation process where rights in 12 fishing sectors are due for re-allocation. The process for the appointment of members to the Fisheries Transformation Council (“the FTC”) is at an advance stage as the Department is now awaiting feedback from the Minister of Finance in respect to his concurrence on the proposed fees payable to members of the FTC and for the Consultative Advisory Forum (“the Forum”), the Department has submitted its request to National Treasury for the National Treasury to commence with its determination process on fees payable to members of the Forum.

The Fisheries Branch/MLRF continued to play a significant role in Operations Phakisa (Oceans Economy) with ongoing technical support being provided to aquaculture projects in Phase 1; 2 and 3. Initiative 5 of Operations Phakisa (Oceans Economy) on Governance saw an increased number of successful joint operations with law enforcement agencies, particularly in identified hot spot areas.

In line with ensuring the sustainable utilisation and equitable and orderly access to the marine living resources, 10 424 people have been recognised by the Minister as small-scale fishers in terms of the Marine Living Resources Act. Work has been done to assist these recognised fishers, in their respective declared fishing communities, to register small-scale fishing co-operatives. To date, two co-operatives have been allocated 15-year fishing rights in the Northern Cape. In other provinces, a total of over 130 co-operatives have been registered and have been assisted with rights applications. The small-scale programme was formally launched in the Eastern Cape on World Fisheries Day in November 2018 and co-operatives have been registered in KZN. The appeals process in the Western Cape has been finalised and the list of successful small-scale fishers has been approved.

Forty-two (42) aquaculture research projects were initiated, sixteen (16) of which were completed, while (7) aquaculture scientific publications and twenty-two (22) technical reports were drafted. Thirty-four (34) students are mentored and supervised, of which six (6) have completed their research and graduated.

36

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roje

cts

wer

e su

ppor

ted.

16 O

pera

tion

Phak

isa

proj

ects

wer

e su

ppor

t as

follo

ws:

Pha

se 1

pro

ject

s =

2; Ph

ase

2 pr

ojec

ts =

7; a

nd

Phas

e 3

proj

ects

= 7

.

(Not

e: Ph

ase

3 pr

ojec

ts a

re

newlyregisteredGreenfields

proj

ects

).

9 A

quac

ultu

re p

roje

cts w

ere

supp

orte

d: •

Rich

ards

bay

Kob

•Re

qua

Mus

sels

•C

hapm

ans M

usse

ls•

Xes

ibe

•Sa

lmar

Trad

ing

•O

yste

rcat

cher

•

Sout

hern

Atla

ntic

Sea

farm

s•

Blue

Oce

an M

usse

ls •

Sald

anha

Bay

Oys

ter

4 O

pera

tion

Phak

isa

proj

ects

sup

port

edA

chie

ved.

16 A

quac

ultu

re p

roje

cts w

ere

supp

orte

d:

•U

lwaz

i Kuk

utya

•Sa

ldan

ha B

ay S

ea F

ood

Proc

esso

r•

Mik

a G

row

ers

•BM

I Ent

erpr

ises

•G

olde

n A

quac

ultu

re•

Sim

unye

Mus

sels

•M

MM

Agr

i Con

sult

•M

adim

a G

ener

al Tr

adin

g•

Plut

o M

usse

ls•

Mny

ama

Mus

sels

•M

ariti

me A

gri

•M

arin

e G

row

ers (

Pty)

Ltd

.•

Salm

ar Tr

adin

g•

Sout

hern

Atla

ntic

Sea

Farm

s •

Afri

can

Oliv

e Tra

ding

•D

oorin

g ba

ai ab

alone

+12

Exce

eded

ann

ual t

arge

t due

to th

e in

crea

sed

dem

and

as a

resu

lt of

the

EIA

th

at w

as a

ppro

ved

in S

aldan

ha B

ay d

urin

g thefinancialyear

2.1.

2 Sm

all-s

cale

A

quac

ultu

re

Supp

ort

Prog

ram

me

deve

lope

d an

d im

plem

ente

d

Small

-sca

le A

quac

ultu

re

Supp

ort P

rogr

amm

e co

ncep

t not

e

Not

ach

ieve

d.

Small

-sca

le A

quac

ultu

re S

uppo

rt P

rogr

amm

e In

cept

ion

repo

rt w

as d

evel

oped

Small

-sca

le

Aqu

acul

ture

Su

ppor

t Pr

ogra

mm

e co

ncep

t not

e w

as

not d

one

Del

ays i

n Su

pply

Cha

in p

roce

sses

on

the

appo

intm

ent o

f the

serv

ice p

rovid

er to

de

velo

p th

e co

ncep

t not

e

2.1.

3A

quac

ultu

re

Dev

elop

men

t Act

de

velo

ped

and

impl

emen

ted

as

per

Ope

ratio

n Ph

akisa

The

Min

ister

ap

prov

ed th

e su

bmiss

ion

to

gaze

tte th

e dr

aft

Aqu

acul

ture

Bill.

Bill

not a

ppro

ved.

Con

sulta

tions

in N

EDLA

C

have

resu

lted

in fu

rthe

r in

puts

into

the

long

title

, th

e pr

eam

ble

and

Cha

pter

1

Definitions.

The

depa

rtm

ent o

f Plan

ning

, M

onito

ring

and

Evalu

atio

n (D

PME)

has

ass

esse

d th

e So

cio-E

cono

mic

Impa

ct

Ass

essm

ent (

SEIA

S) o

f the

A

quac

ultu

re D

evel

opm

ent

Bill

and

gran

ted

perm

issio

n to

the

depa

rtm

ent t

o pr

ocee

d w

ith th

e su

bmiss

ion

of th

e Bi

ll to

Cab

inet

.

Aqu

acul

ture

D

evel

opm

ent B

ill/A

ct

impl

emen

tatio

n pl

an

Not

ach

ieve

d.

The A

quac

ultu

re D

evel

opm

ent B

ill w

as

intr

oduc

ed in

Par

liam

ent o

n th

e 15

th Ju

ne

2018

Aqu

acul

ture

D

evel

opm

ent B

ill/A

ct im

plem

enta

tion

plan

was

not

de

velo

ped.

The

impl

emen

tatio

n pl

an c

an o

nly

be

deve

lope

d on

ce th

e Pr

esid

ent h

as si

gned

of

f on

the

Bill

into

Act

. The

pro

cess

is

curr

ently

und

er P

arlia

men

t pro

cess

es

PE

RFO

RM

AN

CE

INFO

RM

AT

ION

(co

ntin

ued)

Perf

orm

ance

Indi

cato

rs

38

Prog

ram

me:

Fish

erie

s M

anag

emen

t

Perf

orm

ance

In

dica

tor

Act

ual

Ach

ieve

men

t 20

15/2

016

Act

ual A

chie

vem

ent

2016

/201

7A

ctua

l Ach

ieve

men

t 20

17/2

018

Plan

ned

Targ

et20

18/2

019

Act

ual A

chie

vem

ent

2018

/201

9

Dev

iatio

n fr

om p

lann

ed

targ

et to

Act

ual

Ach

ieve

men

t 20

18/2

019

Com

men

t on

devi

atio

ns

2.1.

4N

umbe

r of

aq

uacu

lture

re

sear

ch p

roje

cts

con d

ucte

d

2 ne

w re

sear

ch

on g

enet

ics a

nd

nutr

ition

for

aqua

cultu

re sp

ecie

s w

ere

cond

ucte

d.

2 ne

w re

sear

ch (o

n sp

otte

d gr

unte

r an

d se

lect

ed

ornamentalfish)w

ere

cond

ucte

d.

2 ne

w st

udie

s on

prod

uctio

n sy

stem

s for

new

can

dida

te

spec

ies f

or a

quac

ultu

re w

ere

cond

ucte

d an

d re

port

has

be

en c

ompi

led.

The

Entit

y ac

hiev

ed 3

of t

he 4

plan

ned

aqua

cultu

re re

sear

ch p

roje

cts a

s out

lined

be

low.

One

new

rese

arch

on

eco

nom

ics o

f new

ca

ndid

ate

spec

ies

for

aqua

cultu

re

cond

ucte

d(Se

a ur

chin

)

Ach

ieve

d.

One

new

rese

arch

on

econ

omics

of n

ew

cand

idat

e sp

ecie

s for

aqu

acul

ture

was

cond

ucte

d (S

ea u

rchi

n) a

nd re

port

has

bee

n co

mpi

led

and

appr

oved

.

N/A

N/A

One

new

rese

arch

pr

ojec

t on

prod

uctio

n sy

stem

s for

new

cand

idat

e sp

ecie

s for

aq

uacu

lture

con

duct

ed(S

callo

ps)

Not

ach

ieve

d.

An e

xplo

rato

ry su

rvey

of A

lgoa

Bay

was

co

nduc

ted

in A

pril

2018

by

cont

ract

ed d

ivers

to

est

ablis

h th

e po

pulat

ion

dens

ity a

nd to

co

llect

30

scall

ops p

aren

tsto

ck/b

rood

stoc

k, as

no

live

scall

ops c

ould

be

foun

d in

Fals

e Ba

y.D

urin

g th

e su

rvey

in A

pril

2018

, no

live

pare

ntst

ock/

broo

dsto

ck w

as fo

und

in A

lgoa

Bay

and

only

empt

y sh

ells

wer

e fo

und.

The

natu

ral p

opul

atio

ns o

f sca

llops

will

need

to

reco

ver a

nd ti

mef

ram

es fo

r rec

over

y co

uld

span

a n

umbe

r of y

ears

unl

ess a

pop

ulat

ion

is de

tect

ed e

lsew

here

alo

ng th

e So

uth A

frica

n co

ast

-1Re

sear

ch p

roje

ct o

n pr

oduc

tion

syst

ems

for

new

can

dida

te sp

ecie

s for

aqu

acul

ture

w

as n

ot c

ondu

cted

(Sca

llops

) due

to

pare

ntst

ock/

broo

dsto

ck w

hich

cou

ld n

ot

be o

btain

ed fo

r ex

perim

enta

l pur

pose

s.

One

aqu

atic

anim

al he

alth

rese

arch

pro

ject

(E

pizo

otic

Ulce

rativ

e Sy

ndro

me)

Ach

ieve

d.

One

aqu

atic

anim

al he

alth

rese

arch

pro

ject

(Epi

zoot

ic U

lcera

tiveS

yndr

ome)

was

co

nduc

ted

N/A

N/A

One

rese

arch

pro

ject

on

clim

ate

chan

ge:

Ass

essm

ent o

f te

mpe

ratu

re,

deox

ygen

atio

n an

d acidification

on a

quac

ultu

re

Ach

ieve

d.

One

rese

arch

pro

ject

on

clim

ate

chan

ge:

Ass

essm

ent o

f tem

pera

ture

, deo

xyge

natio

nandacidificationonaquaculturewas

cond

ucte

d an

d re

port

has

bee

n co

mpi

led.

N/A

N/A

PE

RFO

RM

AN

CE

INFO

RM

AT

ION

(co

ntin

ued)

39

Prog

ram

me:

Fish

erie

s M

anag

emen

t

Perf

orm

ance

In

dica

tor

Act

ual

Ach

ieve

men

t 20

15/2

016

Act

ual A

chie

vem

ent

2016

/201

7A

ctua

l Ach

ieve

men

t 20

17/2

018

Plan

ned

Targ

et20

18/2

019

Act

ual A

chie

vem

ent

2018

/201

9

Dev

iatio

n fr

om p

lann

ed

targ

et to

Act

ual

Ach

ieve

men

t 20

18/2

019

Com

men

t on

devi

atio

ns

3.1.

1C

omm

ercia

l fishingrights

alloc

ated

and

ap

peals

pro

cess

m

anag

ed

Fina

l dra

ft FR

AP

fram

ewor

k w

as

appr

oved

by

the

Dep

uty

Dire

ctor

-G

ener

al

The

targ

et w

as p

artia

lly

achi

eved

.

Perm

it C

ondi

tions

wer

e issuedin6fishingsectors

(Lar

ge P

elag

ics (T

una

& SwordfishLongline),Kw

a-Zu

lu N

atal

Beac

h Se

ine,

Net

Fish

, Sea

wee

d, H

orse

M

acke

rel, a

nd P

atag

onian

To

oth

Fish

).

Fina

l list

of s

ucce

ssfu

l W

CRL

Nea

rsho

re a

pplic

ants

pu

blish

ed 3

1 Ju

ly 20

17.

Prov

ision

al lis

t of s

ucce

ssfu

l W

CRL

Offs

hore

app

lican

ts

publ

ished

31

July

2017

. Th

e ap

plica

tions

form

s for

abalo

nefishingrightsw

ere

asse

ssed

by

the A

balo

ne

Ass

essm

ent T

eam

.

Allo

cate

righ

ts in

the

abalo

ne se

ctor

Not

ach

ieve

d.

Righ

ts in

the

abalo

ne se

ctor

wer

e no

t all

ocat

ed h

owev

er e

xem

ptio

n w

as g

rant

ed

to e

xist

ing

long

term

aba

lone

righ

t hol

ders

fo

r th

e 20

18/1

9 ab

alone

seas

on, s

tart

ing

1 N

ovem

ber

2018

unt

il 31

July

2019

Aba

lone

righ

ts w

ere

not a

lloca

ted

The

Del

egat

ed A

utho

rity

decid

ed n

ot

to a

lloca

te r

ights

in th

e ab

alone

sect

or

durin

g 20

18/1

9.

Righ

ts in

the

abalo

ne se

ctor

will

be

allocatedwiththe12fishingsectorsd

ue

for

re-a

lloca

tion

in 2

020

--

Appealsonlyfinalisedin

fournew

lyallocatedfishing

sect

ors (

Hak

e In

shor

e, Fi

sh

Proc

essin

g Es

tabl

ishm

ent,

Larg

e Pe

lagic

and

Pata

goni

an

Toothfish)

Revis

ed p

olici

esan

d ap

plica

tion

formsfor12fishing

sect

ors w

hich

expi

re in

202

0

Not

ach

ieve

d.

1st D

raft

Gen

eral

Polic

y on

the A

lloca

tion

of C

omm

ercia

l Fish

ing

Righ

ts c

ompl

eted

and

co

nsul

ted

inte

rnall

y.

-12

Revis

ion

of th

e po

licie

s and

app

licat

ion

form

s cou

ld n

ot b

e co

mpl

eted

.

The

new

requ

irem

ent t

o co

nduc

t Soc

io-

Econ

omic

Impa

ct A

sses

smen

t Sys

tem

(S

EIA

S) b

y th

e D

PME

inclu

ded

addi

tiona

l re

quire

men

ts th

at re

sulte

d in

plan

ned

mile

ston

es n

ot b

eing

ach

ieve

d.Th

e Re

vised

App

licat

ion

form

s are

dependentonthefinalisationofthepolicy

Supp

ort t

heFR

AP

2015

/16

appe

als p

roce

ss

Ach

ieve

d.

Regu

latio

n 5(

3) R

epor

ts w

ere

draf

ted

for

Netfish,KZ

NBeach-Seine,Seaweed,Hake

Insh

ore T

raw

l; Hor

se M

acke

rel; W

est C

oast

Ro

ck L

obst

er (N

ears

hore

and

Offs

hore

).

TheappealsintheNetfishandKw

aZulu-

NatalSardineBeach-Seinefishingsectors

werefinalisedon25April2018,

TheappealsintheSeaweedfishingsector

werefinalisedon8June2018.

The

appe

als o

f the

WC

RL O

ffsho

re a

nd

ZonesA

-BofW

CRLNearshorewasfinalised

on th

e 20

Sep

tem

ber

2018

.

The

appe

als in

the W

CRL

Nea

rsho

re se

ctor

- Zo

nes D

-F w

ere

conc

lude

d on

the

4 &

16

Oct

ober

201

8.

The

appe

als in

the

Hak

e In

shor

e Tra

wl s

ecto

r w

ere

conc

lude

d on

7 D

ecem

ber

2018

.

N/A

N/A

PE

RFO

RM

AN

CE

IN

FOR

MA

TIO

N (

cont

inue

d)

40

Prog

ram

me:

Fish

erie

s M

anag

emen

t

Perf

orm

ance

In

dica

tor

Act

ual

Ach

ieve

men

t 20

15/2

016

Act

ual A

chie

vem

ent

2016

/201

7A

ctua

l Ach

ieve

men

t 20

17/2

018

Plan

ned

Targ

et20

18/2

019

Act

ual A

chie

vem

ent

2018

/201

9

Dev

iatio

n fr

om p

lann

ed

targ

et to

Act

ual

Ach

ieve

men

t 20

18/2

019

Com

men

t on

devi

atio

ns

3.1.

2 Sm

all-s

cale

Fi

sher

ies P

olicy

im

plem

ente

d

Regu

latio

ns

prom

ulga

ted

unde

r M

LRA

am

ende

d to

inclu

de th

e m

anag

emen

t of

Small

-sca

le F

isher

ies.

No

right

s wer

e all

ocat

ed

to re

giste

red

small

-sca

le

coop

erat

ives

Prog

ress

mad

e in

clude

d th

e co

nclu

sion

of th

e ex

pres

sion

of In

tere

st p

roce

ss in

all

4 co

asta

l pro

vince

s; th

e pu

blica

tion

of th

e pr

ovisi

onal

listsofsuccessfulfishers

for

the

East

ern

Cap

e (E

C),

Nor

ther

n C

ape

(NC

) and

W

este

rn C

ape

(WC

).; a

nd

the

evalu

atio

n of

app

eals

for

the

NC

and

WC

.

Small

-sca

le F

isher

ies C

o-op

erat

ive Tr

ainin

g M

anua

l w

as d

evel

oped

and

train

ing

prov

ided

to c

omm

uniti

es in

N

C a

nd K

ZN.

Righ

ts a

lloca

ted

to

regis

tere

d sm

all-s

cale

fisheriescooperatives

Not

ach

ieve

d.

Thesmall-scalefishingrightsw

ereallocatedin

Nor

ther

n C

ape

No

right

s wer

e all

ocat

ed to

EC

, KZ

N a

nd W

C c

o-op

erat

ives

The

tip-o

ff pr

oces

s cau

sed

del

ays i

n finalizingthelistofsmallscalefishersin

the W

este

rn C

ape

and

ther

e w

ere

delay

s in

the

regis

trat

ion

of c

o-op

erat

ives w

ith

CIP

C fo

r th

e EC

and

KZN

4.1.

1 Su

stain

able

m

anag

emen

t of

fishstock

Reco

very

plan

s fo

r th

e 3

sect

ors:

Aba

lone

, WC

RL a

nd

deep

wat

er h

ake

upda

ted.

Reco

very

plan

s for

2 se

ctor

s:

Aba

lone

and

WC

RL w

ere

com

pile

d.

Reco

very

plan

s for

the

2 se

ctor

s: A

balo

ne a

nd W

est

Coa

st ro

ck lo

bste

r w

ere

com

pile

d.

Reco

very

plan

s for

the

2 se

ctor

s: A

balo

ne a

nd

Wes

t Coa

st ro

ck lo

bste

r

Not

ach

ieve

d.

Theinter-areaschedulewasfinalisedin

cons

ulta

tion

with

the

exem

ptio

n ho

lder

s. A

pplic

atio

ns fo

r pe

rmits

for

the

2018

/19

fishingseasonreceived,considered.

WC

RL In

ter-a

rea

sche

dule

was

sign

ed o

ff on

07

Nov

embe

r 20

18, a

nd th

e pe

rmits

issu

ed

ther

eafte

r

Reco

very

plan

for

abalo

ne w

as n

ot

deve

lope

d.

The

Min

ister

uph

eld

the

2018

/19

Aba

lone

TACappealandresetthefishingseason

from

9 A

pril

2019

to 9

Janu

ary

2020

Perm

its fo

r th

e Aba

lone

sect

or a

re

curr

ently

bei

ng p

roce

ssed

Rese

arch

repo

rt to

indicatefishstock

leve

ls co

mpi

led

for:

Wes

t Coa

st R

ock

Lobs

ter,

deep

-wat

er

hake

and

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41

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42



STRATEGY TO OVERCOME AREAS OF UNDERPERFORMANCE

Aquaculture Development Bill/Act developed and implemented as per Operation Phakisa

The Aquaculture Development Bill was approved by the Cabinet on 02 May 2018. The Aquaculture Development Bill was introduced in Parliament on the 15th June 2018. Thereafter, progress is dependent on the completion of parliamentary processes. Parliament declared that the Bill will be processed once the 06th Parliament rises.

Small-Scale Fisheries Policy implemented

The process of allocating small-scale fishing rights to communities is at an advanced stage. Fishing rights have been allocated in the Northern Cape. It was not possible to allocate rights in the Western Cape, Eastern Cape and KwaZulu-Natal due to the tip-off information process and the delays experienced with CIPC and registration of co-operatives. To fast-track rights allocation, all co-operatives in EC and KZN have been visited and assisted to apply for fishing rights. The allocation of small-scale fishing rights in the remaining provinces has been carried over from 2018/19 to 2019/20.

Commercial fishing rights allocated and appeals process management

The target of reviewing policies and application forms for fishing sectors where rights expire in 2020 was not achieved. However, the Department has started with the process of preparing and gearing up for the 2020 FRAP process. The Minister has appointed the Delegated Authority; the FRAP project teams have been identified and appointed; a provisional roadmap has been identified, and internal discussions have commenced on the apportionment of resources between the small-scale and commercial sectors in those nearshore fisheries that qualify for the small-scale basket of species. Abalone will be considered as part of the 2020 fishing rights allocation process.

Annual Service Deliver Improvement

Plan Progress Report

43

44


Annual Service Deliver Improvement Plan Progress Report

Acronyms

DAFF Department of Agriculture, Forestry and Fisheries DDG Deputy Director-GeneralDPSA Department of Public Service and Administration GDP Gross Domestic Product ICT Information Communication and TechnologyMDG millennium development goalsMLRA Marine Living Resources ActMLRF Marine Living Resources FundMTEF Medium Term Expenditure FrameworkOIE Office International des Epizooties PAIA Promotion of Access to Information Act SDIP Service Delivery Improvement Plan

1. Introduction

The improvement of service delivery standards is as strategic imperative for government, especially in its drive to eradicate poverty and meet the other millennium development goals (MDG) to which it is committed. In response to the challenges of service delivery, government has introduced the concept of Batho Pele-People First which is aimed at changing attitudes and the culture of public service from a “can’t do to a “can do and will do” mindset. Service Delivery Improvement Plan (SDIP) is a value-add for the institution in that it ensures continuous improvement of services. The plan gives a focused approach in improving a specific service and ensures proper allocation of resources. Reporting against the plan is crucial as it highlights areas of improvement and how the relevant department aims at improving on the services from current standards to desired standards.

2. Purpose

SDIP is an action plan that outlines details on how the Batho Pele concept will be implemented. It is the “how” of Batho Pele. SDIP will focus on bringing the Batho Pele principles to life, thereby making service delivery a reality for the citizens. In terms of the Public Service Regulations, 2001, Part III.C1, an executing authority must establish and sustain a service delivery im-provement plan for his or her department. The Department of Public Service and Administration (DPSA) also requires that the SDIP should be developed, reported and implemented in accordance with the MTEF. Departments are expected to select and improve key services which have a direct impact on beneficiaries. Progress reporting must be done annually to the DPSA.

The following key services have been identified to be subjected to improvement processes;

• Issuing of permits in terms of the provisions of Section 13 and 83 of the MLRA.

45


VIA POST: 1 (a) Mail is received by the mail department (registry) who logs the mail received into the mail register

2 (a) Mail is then sent to the relevant departments e.g. applications for permits received will be sent to CSC.

4 (a) CSC consultant then checks on MAST to see if application fee has been paid and allocates a reference no

5. Printed Permit, application and supporting documents are now sent to AD or DD, who will verify all the details and issues permit on MAST. This process requires 16 MRM staff members and 1 SAM staff member.

3 (a) CSC logs mail into register, and checks for relevant documentation and verifies the application.➜ ➜ ➜ ➜

VIA CSC:1. Rights Holder submits the application form and relevant supporting documentation to a CSC consultant.

2. CSC consultant enters the application into the application register, verifies application and issues the reference number.

3. Right Holder pays application fee at the cashier (a member of finance/revenue department).

4. Application is sent to MRM and also to SAM where Administrative staff receive, verify and process the application on MAST and print permit.

➜ ➜ ➜

HR requirements: 13 officials from

customer services


customer services

HR requirements: 1 official from

customers services (CS)

HR requirements: 4 officials from CS, 25 from MRM, 2 from

SAM


MRM, 1 from SAM

5 (b) If refused, then application is sent to CSC who informs client telephonically

No capacity to inform clients to administer

collections

6. CSC informs client telephonically that the permit is ready for collection

5 (a) If approved, then permit issued, then together with permit conditions and landing books forwarded to CSC

➜➜

➜

Annual Service Deliver Improvement Plan Progress Report (continued)

3. Business process mapping

46

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49

Part C

Annual Financial Statements

51

52


ANNUAL FINANCIAL STATEMENTSfor the year ended 31 March 2019

Statement of Financial Position .................................................................................................... 53

Statement of Financial Performance ........................................................................................... 54

Statement of Changes in Net Assets ........................................................................................................ 55

Cash Flow Statement ................................................................................................................................... 56

Statement of Comparison of Budget and Actual Information ............................................................ 57

Notes to the Annual Financial Statements .............................................................................................. 58 - 94

Detailed Statement of Financial Performance ........................................................................................ 95 - 96

53


STATEMENT OF FINANCIAL POSITIONas at 31 March 2019

NOTES2019

R’0002018

R’000

ASSETS

Non-current assetsPlant and equipment 2 298 822 317 683

Intangible assets 3 110 144

298 932 317 827

Current assetsInventory 4 106 510 81 640

Trade and other receivables 5 13 161 18 786

Cash and cash equivalents 6 264 981 207 561

384 652 307 987

Total assets 683 584 625 814

LIABILITIESCurrent liabilitiesDeferred income 7 247 797 177 247

Donor funds 8 2 014 1 895

Trade and other payables 9 83 656 48 875

Total liabilities 333 467 228 017

Net assets 350 117 397 797

NET ASSETSAccumulated surplus 350 117 397 797

Total net assets 683 584 625 814

54


STATEMENT OF FINANCIAL PERFORMANCEfor the year ended 31 March 2019

NOTES2019

R’0002018

R’000Revenue

Revenue from exchange transactions 10.1

Application Fees 4 689 4 674

Chartering of Departmental Vessels 1 084 -

Harbour Fees 3 746 4 801

Licences and Permits 30 527 32 976

Grant of right Fee 767 2 270

Foreign Exchange Surplus 12 - 106

Finance Income 13 17 593 17 298

Total Revenue from Exchange Transactions 58 406 62 125

Revenue from non-exchange transactionsLevy on Fish Products 10.2 59 143 70 299

Fines 11.1 1 648 20 198

Grants and Other Transfer Payments 180 713 176 411

Realisation of Conditional Grants 13 470 22 244

Confiscated Assets and Fish Products 24 871 49 286

Other income 854 1 498

Service in kind 14 368 403 380 312

Donations in kind 4 594 -

Total Revenue from Non-Exchange Transactions 653 696 720 248

Total Revenue 712 102 782 373

Expenses

Consumables used (3 702) (6 364)

Depreciation and amortisation (26 720) (27 033)

Transportation costs (46 073) (41 860)

Advertising costs (364) (590)

Operating lease payments 15 (2 698) (2 789)

Other deficits (23) (24)

Vessel operating costs 16 (179 069) (168 263)

Financial contributions (5 394) (11 151)

Other operational costs (127 124) (125 277)

Foreign exchange loss 12 (211) -

Service in kind 14 (368 403) (380 312)

Total Expenditure (759 781) (763 663)

Surplus/(Deficit) for the year (47 679) 18 710

55


NOTES

Accumulated surplusR’0002019

Total net assetsR’0002019

Balance at 1 April 2017 379 086 379 086

Reinstated surplus for the year 18 710 18 710

Surplus for the year 2018 18 296 18 296

Prior period error: 18 414 414

Realisation of deferred income 414 414

Government grants 16 197 16 197

Vessel operating costs (16 197) (16 197)

Legal fees (978) (978)

Other income 978 978

Balance at 1 April 2018 397 796 397 796

Surplus/(Deficit) for the year (47 679) (47 679)

Balance at 31 March 2019 350 117 350 117

STATEMENT OF CHANGES IN NET ASSETS for the year ended 31 March 2019

56


CASH FLOW STATEMENTfor the year ended 31 March 2019

NOTES2019

R’0002018

R’000

Cash flows from operating activitiesCash receipts from customers 114 608 189 228

Cash paid to suppliers (327 640) (413 213)

Net cash utilised by operations 17 (213 032) (223 985)

Finance cost - -

Finance income 17 593 17 298

Net cash outflow from operating activities (195 439) (206 687)

Cash flows from investing activitiesPurchases of plant and equipment 2 (3 243) (4 866)

Purchases of plant and equipment funded byGovernment grants

Proceeds from disposal of plant and equipment - -

Purchases of intangible assets 3 (10) (155)

Net cash outflow from investing activities (3 253) (5 021)

Cash flows from financing activitiesProceeds from grant received 7 256 112 259 818

Net cash inflow from financing activities 256 112 259 818

Net decrease in cash and cash equivalents 57 420 48 110

Cash and cash equivalents at the beginning of the year 207 561 159 451

Cash and cash equivalents at the end of the year 6 264 981 207 561

57

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58


NOTES TO THE ANNUAL FINANCIAL STATEMENTSfor the year ended 31 March 2019

1 ACCOUNTING POLICIES

The principal accounting policies adopted in preparation of these financial statements are set out below:

1.1 BASIS OF PREPARATION

Statement of compliance

The financial statements have been prepared in accordance with the effective Standards of Generally Recognised Accounting Practice (GRAP), including any interpretations, guidelines and directives issued or adopted by the Accounting Standards Board (ASB).

Basis of measurement

The financial statements have been prepared on an accrual basis of accounting and the historical cost basis except as noted in the accounting policies below.

The accounting policies set out below have been applied consistently to all periods presented in these financial state-ments, unless otherwise stated.

Accounting policies for material transactions, events or conditions not covered by the GRAP Standards adopted, have been developed in accordance with paragraphs 7, 11 and 12 of GRAP 3. These accounting policies and the applicable disclosures have been based on International Public Sector Accounting Standards (IPSAS) and the South African Statements of Generally Accepted Accounting Practices (SA GAAP), including any interpretations of such Statements issued by the Accounting Practices Board.

The preparation of financial statements in conformity with GRAP requires management to make judgments, esti-mates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other fac-tors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

Significant judgement and sources of estimates

GRAP1 paragraph 137 requires disclosure on assumptions, judgements, inputs on items that have estimation uncer-tainty and that relate to the estimates that require management’s most difficult, subjective or complex judgements. As the variables and assumptions affecting the possible future resolution of the uncertainties and complex, and the potential for a consequential material adjustment to the carrying mounts of assets and liabilities normally accordingly.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

59


NOTES TO THE ANNUAL FINANCIAL STATEMENTSfor the year ended 31 March 2019 (continued)

1.2 STANDARDS NOT YET EFFECTIVE

The following standards and interpretations have been issued but are not yet effective. These have been assessed as not applicable to the Fund and will not have an impact.

Reference Description

GRAP 20 Related Party Disclosures

GRAP 32 Service Concession Arrangements: Grantor

GRAP 34 Separate Financial Statements

GRAP 35 Consolidate Financial Statements

GRAP 36 Investment in Associates and Joint Ventures

GRAP 37 Joint Arrangements

GRAP 38 Disclosure of interest in other entities

GRAP 104 Financial Instruments

GRAP 108 Statutory Receivables

GRAP 109 Accounting by principals and agents

GRAP 110 Living and Non-living resources

1.3 PRESENTATION CURRENCY

The functional currency of the Fund is South African Rand. These annual financial statements are presented in South African Rand. All amounts have been rounded to the nearest thousand (1 000) Rand.

1.4 GOING CONCERN ASSUMPTION

Management has carried out an assessment of the entity’s ability to continue operating as a going concern and there-fore concludes that the entity will be able to continue as a going concern for the foreseeable future. These annual financial statements are prepared on a going concern basis.

1.5 FOREIGN CURRENCY TRANSACTIONS

Foreign currency transactions are recorded, on initial recognition in the functional currency, by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction.

At each reporting date, the monetary assets and liabilities outstanding shall be translated using the closing rate. Gains or losses arising on translation are recognised in the statement of financial performance.

60



1.6 PLANT AND EQUIPMENT

Recognition and measurement

Items of plant and equipment are stated at historical cost less accumulated depreciation and impairment losses. Items of plant and equipment acquired at no or a nominal cost are initially recognised at fair value at the date of acquisition and are subsequently carried at deemed cost (fair value at the date of acquisition) less accumulated depreciation and impairment losses. When parts of an item of plant and equipment have different useful lives, they are accounted for as separate items (major components) of plant and equipment.

1.6 PLANT AND EQUIPMENT (continued)

The cost of an item of plant and equipment comprises its purchase price, including import duties and non-refundable purchase taxes, and any directly attributable costs incurred in the acquisition, establishment and installation of such assets so as to bring them to a working condition for their intended use.

The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attribut-able to bringing the assets to a working condition for their intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. Borrowing costs related to the acquisition, construction or production of qualifying assets are capitalised.

The cost of the day-to-day servicing of plant and equipment are recognised in the statement of financial performance as incurred.

Subsequent costs

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits or service potential associated with the item will flow to the Fund and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance costs are charged to the statement of financial performance during the financial period in which they are incurred. Gains and losses on disposal of an item of plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of plant and equipment.

Depreciation

Depreciation is recognised in the statement of financial performance on a straight-line basis over the estimated useful life of each part of an item of plant and equipment.

Each part of an item of plant and equipment with a cost that is significant in relation to the total cost of the item

shall be depreciated separately. The Fund deems vessels as the only item of plant and equipment with significant identifiable components for the purpose of depreciation.

Depreciation begins when an asset is available for use and ceases at the earlier of the date that the asset is derecognised or classified as held for sale in accordance with GRAP 100. A non-current asset or disposal group is not depreciated while it is classified as held for sale.

61


NOTES TO THE ANNUAL FINANCIAL STATEMENTSfor the year ended 31 March 2019 (continued) 1.6 PLANT AND EQUIPMENT (continued)

The estimated useful lives are as follows:

Item Number of years:Infrastructure fixed 15 - 25Computer equipment 3 - 7Computer software 2 - 5Furniture and fittings 10Plant and equipment 5Vehicles 5Vessels – inflatable and ski boats 5Vessels – Research and patrol

– Hull 25 – 35 – Propulsion system, engine, gear box, propellers 25 – 35 – Deck equipment, rib, winches, cranes and anchors 25 – 35 – Navigation, communication and scientific surveillance equipment 25 – 35 – Life rafts 25 – 35

The depreciation method, useful lives and residual values are reviewed at each reporting date. In re-assessing asset

useful lives, factors such as technological innovation, product life cycles and maintenance programmes are taken into account. Residual value assessments consider issues such as future market conditions, the remaining life of asset and projected disposal values.

Vessels under construction are stated at historical cost. Depreciation only commences when the asset is commis-sioned into use.

Derecognition

An item of plant and equipment is derecognised on disposal or when no future economic benefits or service poten-tial are expected from its continued use or disposal. The carrying amounts of assets are written off on disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of financial performance in the year the asset is derecognised.

1.7 INTANGIBLE ASSETS

Computer software acquired by the Fund, which has a finite useful life, is measured at cost less accumulated amor-tisation and accumulated impairment loss.

Subsequent expenditure

Subsequent expenditure is capitalised only when it increases the future economic benefits or service potential em-bodied in the specific asset to which it relates. All other expenditures are recognised in the statement of financial performance as they occur.

62



1.7 INTANGIBLE ASSETS (continued)

Amortisation

Amortisation is recognised in the statement of financial performance on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use. The estimated useful lives for the current and comparative years are as follows:

Computer software 2 years

The amortisation method, useful lives and residual values are reviewed at each reporting date. In re-assessing asset useful lives, factors such as technological innovation, product life cycles and maintenance programmes are taken into account. Residual value assessments consider issues such as future market conditions, the remaining life of asset and projected disposal values.

1.8 IMPAIRMENT OF ASSETS

Non-cash generating assets

The Fund assesses at each reporting date whether there is any indication that an asset may be impaired. If any such indication exists, the Fund shall estimate the recoverable service amount of the asset.

The Fund takes the following factors into account when assessing indication for impairment of assets:

• Cessation or near cessation of the demand or need for service provided by the asset.• Significant long-term changes with an adverse effect in the technological, legal or government policy of the Fund’s

operation. • Available evidence of physical damage on the asset and indication that service performance of an asset is or will

be worse than expected.• Significant long-term changes with an adverse effect in the manner in which the asset is used or expected to be

used. • Decision to halt construction of the asset before it is completed or in usable condition.

When the recoverable service amount of an asset is less than its carrying amount, the carrying amount of the asset shall be reduced to its recoverable service amount. The reduction is an impairment loss. An impairment loss shall be recognised immediately in the statement of financial performance.

1.9 INVENTORY Inventory is initially recognised at cost. Where inventory is acquired at no cost or nominal consideration, the cost

shall be the fair value at the date of acquisition. Fair value is the amount for which the inventory could be exchanged.

The cost of inventory comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventory to its present location and condition.

63



1.9 INVENTORY (CONTINUED)

Inventory is subsequently valued at the lower of cost and net realisable value on a first-in, first-out basis. Net realis-able value is the estimated selling price in the ordinary course of operation less estimated costs of completion and estimated costs necessary to make the sale, exchange or distribution.

1.10 LEASES

Finance leases consistent with the definition set out in the Treasury Regulations refer to a contract that transfers the risks, rewards, rights and obligations incidental to ownership to the lessee and are recorded as a purchase of an asset by means of long term borrowing.

All other leases are classified as operating leases. Payments made under operating leases (leases other than finance leases) are charged to the statement of financial performance on a straight-line basis over the period of the lease. When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised in the statement of financial performance as an expense in the period in which the termination takes place.

1.11 CASH AND CASH EQUIVALENTS Cash and cash equivalents are carried in the statement of financial position at face value. Cash and cash equivalents

comprise cash on hand, deposits held on call with banks and investments in money-market instruments. In the state-ment of financial position and cash flow statement bank overdrafts are included in borrowings.

1.12 CONTINGENCIES

Contingencies

A contingent liability is a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity.

Contingent liabilities are disclosed in the notes to the annual financial statements, unless it is not probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation or the amount of the obligation cannot be measured with sufficient reliability.

1.13 REVENUE

Revenue is measured at the fair value of the consideration received or receivable. Revenue is recognised when it is probable that future economic benefits or service potential will flow to the Fund and when the amount of revenue can be reliably measured, and specific criteria have been met for the Fund’s activities. Revenue from the rendering of services is recognised in the statement of financial performance in proportion to the stage of completion of the transaction at the reporting date.

64



1.13 REVENUE (continued)

The amount is not considered to be reliably measurable until all contingencies relating to the transaction have been resolved.

The fund is exempt for Income Tax.

1.13.1 Revenue from exchange transactions

Revenue from exchange transactions include application fees, chartering of the Fund’s vessels, harbour fees, licenses and permits, pollution clean up equipment hire and confiscated assets and fish products.

Application fees, licenses and permits are accounted for when they are supplied.

Interest income is recognised on a time-proportion basis using the effective interest rate method, taking into account the principal outstanding and the effective interest rate over the period to maturity.

1.13.2 Revenue from non-exchange transactions

Levies on fish products are recognised on receipt of levy declaration certificates from the right holders.

Unconditional grant

An unconditional grant is recognised in revenue when the grant becomes receivable.

Conditional grants and receipts

Revenue received from conditional grants, donations and funding are recognised as revenue to the extent that the Fund has complied with any of the criteria, conditions or obligations embodied in the agreement. To the extent that the criteria, conditions or obligations have not been met a liability is recognised.

Interest earned on investments is treated in accordance with grant conditions. If it is payable to the grantor it is re-corded as part of the liability and if not, it is recognised as interest earned in the statement of financial performance.

Grants that compensate the Fund for expenses incurred are recognised in the statement of financial performance on a systematic basis in the same periods in which the expenses are recognised.

Services in kind

Compensation of employees that administers the Fund and the lease of the premises which are utilised by the Fund for administration purposes are paid by the Department of Agriculture, Forestry and Fisheries. These transactions are disclosed as Government Assistance in the financial statements and included in the Related Parties note.

65



1.14 FINANCIAL INSTRUMENTS

Recognition Financial assets and financial liabilities are recognised on the Fund’s statement of financial position when the Fund

becomes a party to the contractual provisions of the instrument. Financial instruments are initially measured at fair value and plus transaction costs for financial instruments at amortised cost or cost.

Financial assets All financial assets of the Fund were categorised as loans and receivables. The classification depends on the nature

and purpose of the financial assets and is determined at the time of initial recognition.

Loans and receivables Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an

active market are classified as ‘loans and receivables’. Loans and receivables are measured at amortised cost using the effective interest method less any impairment. Interest income is recognised by applying the effective interest rate.

Effective interest method The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating in-

terest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or, where appropriate, a shorter period.

Impairment of financial assets Financial assets are assessed for indicators of impairment at each year end. Financial assets are impaired where there

is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted. For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account. When a trade receivable is uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in the statement of financial performance.

Financial liabilities

All financial liabilities of the Fund were classified as other financial liabilities. The classification depends on the nature and purpose of the financial liabilities and is determined at the time of initial recognition.

66



1.14 FINANCIAL INSTRUMENTS (continued)

Other financial liabilities Other financial liabilities are initially measured at fair value, net of transaction costs. Other financial liabilities are

subsequently measured at amortised cost using the effective interest method, with interest expense recognised using the effective method.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.

1.15 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

The Fund makes estimates and assumptions concerning the future. The resulting accounting estimates will, by defini-tion, seldom equal the actual results. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Provision for impairment of receivables

An estimate for the impairment of receivables is made when collection of the full amount is no longer probable. The provision for impairment of debt shall be calculated on trade receivables only. The total impairment provision of the Fund shall be calculated either by individual debtor or at least per risk category. The Fund reviews trade receivables on a regular basis to identify amounts due by individual debtors that are no longer collectable and should be written off. The total write-off amount is recognised in the statement of financial performance.

Useful lives of property, plant and equipment and intangible assets

Property, plant and equipment and intangible assets are depreciated and amortised over their useful lives which are based on management’s estimates of the period over which the assets will be utilised, taking into account residual values where appropriate. The actual useful lives of the assets and residual values are assessed annually for appropri-ateness and may vary depending on a number of factors. In re-assessing asset useful lives, factors such as technological innovation, product life cycles and maintenance programmes are taken into account. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and projected disposal values.

Property, plant and equipment and intangible assets are considered for impairment where the carrying amount of an asset is greater than its estimated recoverable service amount. Factors taken into consideration in reaching such a decision include the economic viability of the asset itself and where it is a component of a larger economic unit, the viability of that unit itself.

67



1.16 TRANSFER OF FUNCTIONS BETWEEN ENTITIES UNDER COMMON CONTROL The Fund shall recognise only the consideration received (if any) and derecognise the assets transferred and liabilities

relinquished in a transfer of functions as governed by the terms and conditions of the binding arrangement.

As of the transfer date, the Fund shall derecognise from its financial statements, all the assets transferred and liabili-ties relinquished in a transfer of functions at their carrying amounts.

Until the transfer date, the Fund shall continue to measure these assets and liabilities in accordance with applicable

Standards of GRAP.

The difference between the carrying amounts of the assets transferred, the liabilities relinquished and the consider-ation received (if any) from the acquirer shall be recognised in accumulated surplus or deficit.

1.17 RELATED PARTIES

The entity operates in an economic sector currently dominated by entities directly or indirectly owned by the South African Government. As a consequence of the constitutional independence of the three spheres of government in South Africa, only entities within the national sphere of government are considered to be related parties.

Management are those persons responsible for planning, directing and controlling the activities of the entity, including those charged with the governance of the entity in accordance with legislation, in instances where they are required to perform such functions

Close members of the family of a person are considered to be those family members who may be expected to influ-ence, or be influenced by, that management in their dealings with the entity.

Only transactions with related parties not at arm’s length or not in the ordinary course of business are disclosed.

1.18 EVENTS AFTER REPORTING PERIOD

Events after the reporting period those events, favorable and unfavorable, that occurs between the statement of financial position date and the date when the financial statement are authorized for issue.

Two types of events can be identified:(a) those that provide evidence of conditions that existed at the statement of financial position date (adjusting

events after the reporting period);and(b) those that are indicative of conditions that arose after the statement of financial position date (non adjusting

events after the reporting period)

1.19 FRUITLESS AND WASTEFUL AND IRREGULAR EXPENDITURE

Fruitless and wasteful expenditure means expenditure that was made in vain and would have been avoided had reasonable care been exercised. Irregular expenditure means expenditure incurred in contravention of, or not in accordance with, a requirement of any applicable legislation, including the Public Finance Management Act.

68



1.19 FRUITLESS AND WASTEFUL AND IRREGULAR EXPENDITURE (continued)

All fruitless and wasteful and irregular expenditure is recognised in the statement of financial performance against the respective class of expenditure in the period in which they are incurred and where recovered, it is subsequently accounted for as revenue in the statement of financial performance.

1.20 BUDGET INFORMATION

The annual budget figures which have been prepared on modified accrual basis are scheduled in a separate additional financial statement, called the statement of comparison of budget and actual information. Explanatory comments are provided in the notes to the annual financial statements stating reasons for and motivating overspending and underspending. The annual budget figures included in the financial statements are for the Fund. These figures are approved by the Executive Authority.

1.21 MATERIALITY FRAMEWORK Information is material if its omission or misstatement could influence the economic decisions of users taken on the

basis of the financial statement. Materiality depends on the size of the items or error judged in the particular circum-stances of its omission or misstatement. Thus materiality provides a threshold or cut-off point, rather than being a primary qualitative characteristic which information must have if it’s to be useful. Based on the business nature of the MLRF and as a public service organisation the best indicator with regard to business activity is expenditure. The Fund has determined its materiality level at 0.50% of expenditure. In determining the said materiality, both qualitative and quantitate factors were considered. Quantitative factors include the nature of the entity’s business, the statutory requirements laid down on the entity, with specific reference to the PFMA, Treasury Regulations and MLRA and the control and inherent risks associated with the entity.

69

Marine Living Resources FundN

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70



2. PLANT AND EQUIPMENT (continued)

During the year a major repair and maintenance amounting to R 10 146 000 was incurred in the AFRICANA. AFRICANA is one of the vessesl used by Chief Directorate: Fisheries Research and Development for conducting surveys on marine life. The total repairs and maintenance on all the vessels amounts to R21 516 617.58 (2018: R12 252 154.22). Both balances for 2019 and 2018 include routine repairs and maintenance that were incurred thoroughout the financial years.

2019R’000

2018R’000

Other information

Plant and equipment fully depreciated still in use

Cost 105 546 86 250

Accumulated depreciation (105 539) (86 244)

Net book value 7 6

The assets included in the total above have reached the end of their useful lives however these assets are still in their economic lives which are different to the useful lives. Management has evaluated the useful lives of these assets con-sidering technological innovation, product lifecycles, maintenance programmes, capacity planning and availability of funds and concluded that the useful lives of these assets have not changed. Management has the intention to replace these assets provided there is availability of future funding.

3 INTANGIBLE ASSETS

Computer softwareOpening carrying value 144 76

Additions 10 155

Retirements / Reclasses 47 -

Amortisation charge (91) (88)

110 144

At 31 March 2019Cost 8 595 8 535

Accumulated amortisation (8 486) (8 391)

110 144

4 INVENTORY

Confiscated Goods

Raw product (wet) 87 708 64 268

Finished product (dry) 18 802 17 372

106 510 81 640

The value of raw products (wet abalone) was obtained from the fishing companies based as a market related cost. The value finished product is determined by using the price of raw abalone plus all cost related to producing a final product.

71



2019R’000

2018R’00

5 TRADE AND OTHER RECEIVABLES

Trade receivables – local 13 085 16 447

Less: Provision for impairment of trade receivables (1 219) (1 137)

Trade receivables – net 11 866 15 310

Prepayments and advances 1 262 3 331

Other receivable 33 145

13 161 18 786

5.1 Trade and other receivabled from exchange trade and transactions

Trade receivables from exchange transactions – local 14 409 1 068

Less: Provision for impairment of trade receivables from exchange transactions

- -

Trade receivables from exchange transactions - net 14 409 1 068

Prepayments and advances 1 262 3 331

Other receivables 33 145

Total trade and other receivables from exchange transactions 15 704 4 544

5.2 Trade and other receivables from non-exchange transactionsFines (336) 407

Levy of fish products (988) 14 972

Less: Provision for impairment of trade receivables from non-exchange transactions (1 219) (1 137)

Trade and other receivables from non-exchange transactions – net (2 543) 14 242

Total trade and other receivables 13 161 18 786

Included in trade receivables, prepayments and advances is a receivable the South African Maritime Safety Authority (SAMSA) of R 860 020.29 (2018: R 2 507 114.59).

The fair value of trade and other receivables approximate their carrying values.

The value of trade receivables past due but not impaired is R 5 764 506 (2018: R 8 351 623). The ageing of trade receivables past due but not impaired at the reporting date was:

31-60 Days 442 468

61 Days plus 5 323 7 884

5 765 8 352

72



2019R’000

2018R’000

5 TRADE AND OTHER RECEIVABLES (continued)

Movements on the provision for impairment of trade receivables are as follows:

At the beginning of the year 1 137 1 049

Increase in provision from prior year 82 88

At the end of the year 1 219 1 137

The creation of the provision for impaired receivables has been included in the relevant income stream in the state-ment of financial performance. Amounts charged to the provision for impairment account are generally written off when there is no expectation of recovery of additional cash. The other classes of receivables do not contain impaired assets. The maximum exposure to credit risk at the reporting date is the fair value of each class of receivables men-tioned above. The fund does not hold any collateral as security.

6 CASH AND CASH EQUIVALENTS

Cash at bank and on hand 1 634 399

Short-term investments 263 347 207 162

264 981 207 561

Cash and cash equivalents include the following for the purposes of the cash flow statement:

Petty CashDeposit bank accountPayment bank account

42535

1 057

4220

337

1 634 399

Included in the short-term investments are the following call deposit accounts:

Operational contributions 9 13 482

Earmarked Funds 261 313 191 774

Donor Funds 2 025 1 906

263 347 207 162

7 DEFERRED INCOME

7.1 Deferred Income – Vessel Operating Costs

Balance at the beginning of the year 1 195 -Conditional grants received 172 093 169 458

Expenditure incurred (173 288) (168 263)

Operational projects (173 288) (168 263)

Capital projects - -

Balance at the end of the year - 1 195

73



2019R’000

2018R’000

7 DEFERRED INCOME (continued)

7.2 Deferred Income – GARIEP

Balance at the beginning of the year 4 750 5 835

Conditional grants received - -

Expenditure incurred (420) (1 085)

Balance at the end of the year 4 330 4 750

7.3 Deferred Income – Working For Fisheries Programme


Conditional grants received 79 020 84 360



7.4 Deferred Income – Operation Phakisa


Conditional grant received 5 000 6 000



Total Deferred Income balance at the end of the year 247 797 177 247

8 DONOR FUNDS


Donor receipt -

Finance income earned 119 119

Donor fund expenditure -


74



2019R’000

2018R’000

9 TRADE AND OTHER PAYABLES

Trade and other payable from exchange transactions consist of:

Trade payables – local 83 459 48 678

Trade payables – foreign 197 197

83 656 48 875

The fair value of trade and other payables transactions approximate their carrying value.

Trade and other payables

Accrued expenses 64 994 29 129

Income received in advance 3 680 3 974

Accounts payable 7 641 6 196

Employee claim control 152 274

Creditors with debit balance 59 53

Debtors with credit balances 7 130 9 249

83 656 48 875

10 OPERATING REVENUE

10.1 Revenue from exchange transactions

Application fees 4 689 4 674

Chartering of Departmental Vessels 1 084 -

Harbour Fees 3 746 4 801

Licenses and permits 30 527 32 976

Grant of right 767 2 270

40 813 44 72110.2 Revenue from non-exchange transactions

Levy on fish products 59 143 70 299Total operating revenue 99 956 115 020

11 OTHER INCOME

11.1 Revenue from exchange transactions


854 1 498

75



2019R’000

2018R’000

11 OTHER INCOME (continued)

11.1 Revenue from non-exchange transactions

Fines 1 648 20 198

Net confiscated assets and fish products 24 781 49 286

- Confiscated assets and fish products - 22 266

- Net movement in confiscated inventory 24 781 27 02

Grants and other transfer payments 180 713 176 411

Other income – realisation of conditional grants 13 471 22 244

Total other income from non-exchange transactions 220 613 268 139

12 FOREIGN EXCHANGE(LOSS)/SURPLUS

The exchange differences credited/(charged)to the statement of financial performance are included as follows:

Foreign exchange surplus/(loss) - 106

13 FINANCE INCOME

Revenue from exchange transactionsInterest earned on investments and cash balances 17 488 16 307

Other outstanding amounts 105 991

17 593 17 298

14 SERVICES IN KIND

As disclosed in note 21 Related Parties the following government assistance was received during the year:

Compensation of the employees that administers the Fund is paid by the De-partment of Agriculture, Forestry and Fisheries (DAFF). The compensation is disclosed in the financial statements of DAFF.

286 474 299 885

The increase in the compensation of the employees is mainly due to the in-creased remuneration paid to employees during the year.

The leases for premises which are utilised by the Fund for administration purposes were paid by the Department of Agriculture, Forestry and Fisheries (DAFF) The lease expenditure is disclosed in the financial statements of DAFF.

81 929 80 427

The decrease in the above lease cost as a result of leases that has lapsed and not renewed.

These amounts are recognised in the statement of financial performance of the Fund as service in kind.

Services in Kind 368 403 380 312

76


2019R’000

2018R’000

15 OPERATING LEASES

MLRF leases photocopy machines from Minolta and Sebtech for the period of 36 months. The lease payments differ per machine leased. The agreement does not have escalation clause. The lease payments are fixed for the duration of the lease agreement unless extended. No contingent rent is payable. The lease agreement has an option to renew at the end of the lease term.

Operating lease commitments - where the Fund is the lessee.

The future aggregate minimum lease payments under non-cancellable operat-ing leases are as follows:

Not later than 1 year 1 064 1 677

Later than 1 year, but not later than 5 years 315 1 381

Later than 5 years - -

1 379 3 058

16 VESSEL OPERATING COSTS

Samsa-daff crew costs salaries 68 846 71 162

Samsa-daff- crew costs 1 410 1 847

Samsa-daff- catering (meals) 5 175 3 846

Samsa-daff- consumables 3 280 2 919

Samsa-daff- spare parts 8 909 3 487

Samsa-daff- maintenance & repairs 31 663 12 252

Samsa-daff- dry docking 1 000 3 285

Samsa-daff-port & miscellaneous 20 173 20 015

Samsa-daff- insurance hull 1 252 3 185

Samsa-daff- bunkers 15 468 18 932

Samsa-daff- management fee 21 771 19 793

Other vessel related costs 121 7 540

179 068 168 263

The Marine Living Resources Fund has a 10 year contract with South African Maritime Safety Authority for the management (SAMSA) of six (6) vessels. SAMSA‘s contractual obligation is to manage the vessels on behalf of the Fund.SAMSA is given monthly advance payments. SAMSA is required to provide monthly invoice on the expenditure against the advance. The vessel operating costs are finance through a conditional grant received from National Trea-sury via Department of Agriculture, Forestry and Fisheries. The disclosed costs relate to the management of vessels.


77



2019R’000

2018R’000

17 CASH FLOW INFORMATION

Cash utilised by operationsOperating surplus/(deficit) (47 679) 18 710

Non-cash items and items dealt with separately:

Bad debt write-off 4 141

Depreciation and amortisation 26 720 27 033

Finance income (17 593) (17 298)

Finance cost - -

Realisation of deferred income (185 564) (190 507)

Donations in kind (4 594) -

Increase in value of confiscated assets (24 871) (27 020)

Increase in provision for impairment of trade receivables 82 88

Loss on disposal of plant and equipment 23 24

Surplus on foreign exchange translation 212 (106)

Cash utilised by operations before working capital changes (214 260) (188 935)

Working capital changes

Inventory - -

Trade receivables 5 540 (8 103)

Trade payables, accruals and provisions 34 569 (27 066)

Donor funds 119 119

(213 032 (223 985)

In the cash flow statement, proceeds from disposal of plant and equipment comprises: -

Loss on disposal of plant and equipment (23) (24)

Proceeds from disposal of plant and equipment

78


NOTES TO THE ANNUAL FINANCIAL STATEMENTSfor the year ended 31 March 2019 (continued)18 EFFECT OF PRIOR YEAR ERROR

The prior period year error was a result of unrealized income on conditional grants for vessel operating costs. The invoice of R413 802.04 was correctly captured as an expense but the income was not realized and the deferred in-come was reduced with the expenses. This result in revenue being understated and deferred income being overstated

In 2017/18, an invoice for legal for legal fees was claimed twice. The amount claimed twice was R875 336.12. Incorrect entries were passed to raise the debt, other income was credited instead of reducing the legal fees expensed. The other error affecting legal fees was when it was found that the line item amount on the invoices was different from the supporting document attached. The correcting entrie was to raise a debt and reduce legal costs but instead other income was increased by R102 396.74. The totil of the two invoices is R977 732.86

All the 2017/28 crew salaries invoices were understated by Samsa. Samsa included the net amount of crew salaries instead of claiming the full crew salaries cost. The total amount of R16 197 470.77 should be realized as expense and income as it affect deferred income and prepayment balance.

The effect for the correction is to realise both amounts under Realisation of deferred income for the to the condi-tional grant received in 2017/18.

As previously statedR’000

Effect of prior year error

R’000

Restated amount

R’000Reconciliation of retained earnings on 31 March 2018

Retained earnings 18 296 18 296

Realisation of deferred income 414 414

Other income (978) (978)

Legal fees 978 978

Grants and other transfers (16 197) (16 197)

Vessel operating costs 16 197 16 197

18 296 414 18 710

ASSETS

Current assetsTrade and other receivables 34 984 (16 197) 18 786

Statement of Financial PositionLIABILITIESCurrent LiabilitiesDeferred income 193 859 (16 610) 177 246

Statement of changes in net assetsBalance at 1 April 2017 379 086 - 379 086

Prior year error 414

Deficit for the year(previously reported) 18 296 - 414

Balance at 31 March 2018 397 382 414 397 796

79



2019R’000

2018R’000

19 CONTINGENT LIABILITIES

Litigation:

As was reported in the prior year, litigations were initiated against a service provider who installed an integrated financial system. The service provider was unable to deliver a fully functional system and was consequently sued for breach of contract for an amount of R3 165 337.

The service provider instituted a counter claim for R1 667 811. The matter has been ongoing. A trial date has not been set. Parties are engaging in the preliminary steps to trial.

Estimated legal costs: 1 132 1 132

Possible losses: 2 800 3 165

A High Court matter was instituted in the Western Cape High Court against the Dep-artment and officials within the Department for damages in the amount of R2 280 000 for assault and various other charges. This matter is being defended and plaintiff has been requested to rectify certain irregularities in its summons.

Estimated legal costs: 760 760

Possible losses: 2 280 2 280

A Magistrates Court matter for a claim of damages against the Department. If the applicant is successful in its application the Department will be liable for payment of damages.


Possible losses: 400 251

A Magistrates Court matter where the applicant sues the Department for damages pursuant to a motor vehicle accident.




Estimated legal costs: - 17

Possible losses: - 47

80



2019R’000

2018R’000

19 CONTINGENT LIABILITIES (continued)




A matter was instituted in the Regional Court Western Cape against the Department for damages.



A Magistrate Court matter where the applicant sues the Department for unlawful and wrongful arrest.






An eviction matter.


Possible losses: - -

A Magistrates Court matter where the applicant is suing the Department for damages pursuant to a motor vehicle accident.



81



2019R’000

2018R’000

19 CONTINGENT LIABILITIES (continued)A Labour matter instituted against the Department claiming unfair dismissal.



Damages claim instituted

Estimated legal costs 800 -

Possible losses: 2 458 -

Summons issued against the Department for damages due to unlawful and wrongful arrest.















82



2019R’000

2018R’000

19 CONTINGENT LIABILITIES (continued)

A Labour matter instituted against the Department claiming unfair dismissal.



A Magistrate Court matter where the application is suing the Department for unlawful and wrongful arrest.

Estimated legal costs: 251 -

Possible losses: 83 -

A Magistrate Court matter where the applicant is suing the Department for unlawful and wrongful arrest.



Claim against the Department for unlawful arrest and damages



Claim against the Department for unlawful arrest and damages.


Possible losses: 2 087 -

Breach of contract



Claim against the Department for appeal

Estimated legal costs: 1 000 -

Claim against the Department for appeal


83



2019R’00

2018R’000

CONTINGENT LIABILITIES (continued)

Overtime claim by the Department of Agriculture, Forestry and Fisheries

Overtime claim 10 124 -

20 RELATED PARTIES

The following related parties were identified:

20.1 Department of Agriculture, Forestry and Fisheries (DAFF)The following are transactions with DAFF:

Compensation of the employees that administer the Fund is paid by DAFF. 286 474 299 885

The lease expenditure for the premises which are utilised by the Fund for administration purposes, were paid by the DAFF.

81 929 80 427

Government Grants received from DAFF in terms of Earmarked Funds in a Medium Term Expenditure Framework:

Operational grants received 180 713 177 306

Financial contribution 8 620 7 848

Vessel Operating costs 172 093 169 458

Working for Fisheries conditional grant (refer note 7) 79 020 84 360

Payments made for the current year 1 257 3 793

Outstanding balance payable as at 31 March 10 806 1 080

Outstanding balance receivable as at 31 March (900) 300

The outstanding balance payable includes R10 806 134.71 which relates to salary claims for Fisheries employees.

20.2 Key personnel

Minister: Mr. S ZokwaneBasic salary 1 321 1 265

Political office bearers allowanance 120 120

Pension fund 324 312

Medical aid provision 1 1

Non pensionable allowance 635 610

84



2019R’00

2018R’00

20 RELATED PARTIES (continued)

Deputy Minister: Mr. NS ButheleziBasic salary 1 067 1 021

Political office bearers allowance 120 120


13th cheque provisionNon pensionable allowance

89435

85419

Director-General: Mr. M MlenganaBasic salary 1 317 1 248


Non-pensionable allowance 393 373

Deputy Director-General: Ms. S NdudaneBasic salary 1 012 960


Car allowance 37 37

Housing allowance 137 137


Chief Financial Officer: Mr. J HlatshwayoBasic salary 978 927


Medical aid provision 46 -

13th cheque provision 81 77


Chief Director: Fisheries Operations Support: Ms Sue MiddletonBasic salary 757 707

Pension fund 98 92

Car allowance 112 112


Chief Director: Aquaculture & Economic Development: Mr. B SemoliBasic salary 832 789



Car allowance 96 96


85



2019R’00

2018R’00

20 RELATED PARTIES (continued)

20.2 Key personnel

Acting Chief Director: Financial ManagementBasic salary 703 664

Pension fund 91 86



Acting allowance - 163

Acting Chief Director: Marine Resources Management: Mr. A NjobeniBasic salary 650 604

Pension fund 84 78




Acting allowance 92 114

Acting Chief Director: Fisheries Research Development: Mr. S PheehaBasic salary 621 586

Pension fund 81 76



Housing allowance 60 60


Acting allowance 78 -

86



2019R’00

2018R’00

21 FRUITLESS AND WASTEFUL AND IRREGULAR EXPENDITURE

21.1 Opening balance 2 191 1 102

Fruitless and wasteful expenditure incurred during the year - 1 089

Condoned during the year -

Closing balance 2 191 2 191

21.2 FRUITLESS AND WASTEFUL EXPENDITURE

Deviation for appointment of legal advisor 2 149 2 149

Interest on late payment 42 42

2 191 2 191

The current year amount of R149 847 (2018: 144 615) relates to fraudulent payments from donor funds that oc-curred during the 2009/10 financial year. The staff members involved resigned before the internal disciplinary hear-ings were completed. Criminal charges were laid with the SAPS. Both Accused 1 and 2 has entered into a plea bargain with the State whereby it was agreed that the Accused will repay the fraudulent payments. To date only R10 900 has been recovered from Accused 1. To date the full amount has been recovered from Accused 2.

The current year fruitless and wasteful expenditure relates to the appointment of external services which could have been avoided

During the current year the Fund incurred interest of R0 on a late payment of a supplier (2018: R0)

Opening Balance 2 191 1 102

Fruitless and Wasteful expenditure incurred during the year - 1 089

Condoned during the year - -

Closing balance 2 191 2 191

21.2 RECONCILIATION OF IRREGULAR EXPENDITURE

Opening Balance 172 281 103 400

Non-compliance to PPPFA and PPR requirements 10 721 40 327

Irregular expenditure with regard to Samsa: Maritime Special Projects 385 28 554

Condoned during the year - -

Closing balance awaiting condonement 183 387 172 281

During the current financial year the Fund incurred irregular expenditure to the total of R10 721 245.52, R1871 009.02 relates to the appointment of appeals team which was not in line with the SCM prescripts. An amount of R 56 052.74 relates procurement of goods where the local content production was not specified as required by SCM prescripts. The remaining balance of R8 794 183 .76 relates to the awarding of the harbour management contract to implementers based only on their experience and no other PPPFA requirements. Samsa irregular expen-diture relates to an amount of R4 603.61 which was paid over the quoted amount and there was not approval for the excess amount paid to the supplier.The other irregular expenditure was on the contract extension cost which exceeded 15%, and amount regarded as irregular is R380 090.14

87



22 FINANCIAL RISK MANAGEMENT 22.1 Financial risk factors The management of the Fund have overall responsibility for the establishment and monitoring of the Fund’s risk

management policies and procedures which have been established to identify and analyse the risks faced by the Fund, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and procedures are reviewed regularly to reflect changes in market conditions and the Fund’s activities.

The Fund’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest

rate risk and price risk), credit risk, liquidity risk and interest rate risk.

(a) Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect

the Fund’s income. The objective of market risk management is to manage and control market risk exposure within acceptable parameters, while optimising the return.

(i) Foreign exchange risk

The Fund operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar and the Euro. Foreign exchange risk arises from, recognised assets and liabilities. The Fund has a medium foreign exchange risk for accounts payable as a result of not taking cover against unfavourable changes in the exchange rate. Foreign exchange risk arises when recognised assets or liabilities are denominated in a currency that is not the entity’s functional currency.

(b) Credit risk Credit risk is the risk of financial loss to the Fund if a customer or counterparty to a financial instrument fails to

meet its contractual obligations, and arises principally from the Fund’s receivables from customers. An allowance for impairment is established based on management’s estimate of losses in respect of specific trade and other receivables. Bad debts identified are written off as they occur. The Fund’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. There is no significant concentration of unsecured credit risk. Reputable financial institutions are used for investing and cash handling purposes.

(c) Liquidity risk Liquidity risk is the risk that the Fund will not be able to meet its financial obligations as they fall due. The Fund’s

approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due. The liquidity risk is deemed to be low, because the Fund has adequate funds at its disposal.

(d) Interest risk The Fund’s exposure to changes in interest rates is on a floating rate basis relating to funds invested with repu-

table financial institutions.

88



2 FINANCIAL RISK MANAGEMENT (continued)

22.1 Financial risk factors

Interest risk

The carrying amount of financial assets and financial liabilities represent the maximum interest exposure. The maximum exposure to interest risk at the reporting date was:

31 March 2019Floating

Interest rateR’000

Non-interestbearingR’000

TotalR’000

ASSETSCash and cash equivalents 264 981 264 981

Total assets 264 981 264 981

31 March 2018Floating

Interest rateR’000

Non-interestbearingR’000

TotalR’000

ASSETS

Cash and cash equivalents 207 561 207 561

Total assets 207 561 207 56

Interest risk

Financial assets and liabilities Carrying amountInterest rate risk

+50 basis points -50 basis points

Cash and cash equivalent 264 981 +13 249 -13 249

At 31 March 2019, if market interest rates had been 50 basis points higher or lower with all other variables held con-stant, the deficit for the year would have been R13 249 066 lower/higher (2018: R 1 037 804.08 lower/higher), mainly as a result of the higher/lower interest income on floating rate cash and cash equivalents. The figures of R13 249 066 is based on the cash and cash equivalent of R264 981 314 as end of March 2019.

89



2019R’00

2018R’00


22.1 Financial risk factors

Credit risk

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

Trade and other receivables 28 052 34 954

Staff loans 29 29

28 081 34 983

The ageing of trade receivables at the reporting date was:

Current 22 316 26 631

31-60 Days 442 468

61 Days plus 5 323 7 884

28 081 34 983

The movement in the allowance for impairment in respect of trade receivables over the year was:

Balance at the beginning of the year -38 (1 509)

Increase in impairment provision 1 257 2 646


90




Currency risk

There were no open forward exchanges contracts at year-end. The funds net exposure to foreign currency risk at the reporting date was:

2019 Foreign currency

2018 Foreign currency

2019 R’000

2018 R’000

Included in trade and other payables

AU$ 153 465 - 1 563 416 -

GBP 9 324 159 121

US$ 729 63 191 10 649 37 849

EURO

N$

At 31 March 2019, if the Rand had strengthened by 10% against major foreign currencies with all other variables held constant, the deficit for the year would have been R159 706 lower (2018: R19 667), mainly as a result of foreign exchange gains/losses on translation of foreign currency denominated trade payables. Conversely, if the Rand had weakened by 10% against major foreign currencies will all other variables held constant, the deficit for the year would have been R155 107 (2018: R19 732) higher.

FOREIGN CREDITOR ACCRUALS

YEAR END AMOUNT

CURRENCY FOREX RATE

Inmarsat 10,649 US$ 729.52 14.60

CCSBT 1 563 416 AUD 153 566 10.19

1 574 064 154 195

EFFECT ON ACCOUNTS PAYABLE

+10%NEW

AMOUNT MOVEMENT -10%NEW

AMOUNT MOVEMENT

9.17 1 407 075 -158 641 11.21 1 719 758 154 042

13.14 9 584 -1 065 16.06 11 713 1 065

-159 706 -155 107

91



2019R’00

2018R’00


Liquidity riskThe carrying amounts of financial liabilities at the reporting date was:

Trade and other payables 83 656 48 875

83 656 48 875

22.2 Fair value estimation The face value of cash, trade receivables and trade payables less any estimated credit adjustments, are the approximate

fair values on 31 March 2019, as a result of the short-term maturity of these assets and liabilities.

23 STATEMENT OF COMPARISON OF BUDGET AND ACTUAL INFORMATION 23.1 The approved original and final budgets of the Fund are prepared on modified accrual basis and cover the period

1 April 2018 to 31 March 2019.

The approved original budget was submitted to the Executive Authority in line with the Public Finance Management Act, 1999, Chapter 6 Public Entities, part 2 par 53. The Fund performed a budget reprioritisation exercise during 2018/19 and adjusted the initial approved budget.All changes to the initial budget were approved by the Executive Authority. A reconciliation of the budgeted and actual surplus is provided. Refer to note 23.5.

23.2 The Fund does not budget for a surplus. The R7 786 733 surplus in the original and final budget was budgeted for as

capital expenditure of which R7 879 161 was spent during 2018/19.

23.3 Revenue The Fund recorded total revenue of R439 088 863 which is 78% of its final budget. 23.3.1 Operational revenue

The Fund collected 86% of its operational budget during 2018/19.

23.3.2 Other revenue

Revenue from non-exchange transactions includes the amounts recognised in the current financial year relating to the conditional government grants received by the entity for the financial year as well as the realised deferred government grants (unspent earmarked funds) from the previous financial years. The conditional grants are only recognised in the statement of financial performance to the extent that the Fund has complied with the criteria, conditions or obligations.

Vessel Operating Costs:

The total government grant allocated to the MRLF during 2018/19 for vessel operating costs was R172 093 000. This amount was fully utilised in 2018/19.

92



23 STATEMENT OF COMPARISON OF BUDGET AND ACTUAL INFORMATION (continued)

Working for Fisheries Programme:

The budget allocation for the Working for Fisheries Programme (WfFP) in 2018/19 was R79 020 000. Also included in the budget of 2018/19 is the unspent amount of R154 000 000 from the previous financial periods. During the year the entity incurred expenditure of R5 708 934 on the Working for Fisheries Programme and this amount was recognised in the statement of financial performance. The unspent amount of R226 189 650.48 is recognised as a liability in the statement of financial position.

Operation Phakisa

Included in the revenue budget is R14 000 000 for earmarked funds for the establishment of Operation Phakisa Ocean Economy units within MLRF. The money was received from Department of Environmental Affairs. During the year the entity incurred expenditure of R6 146 537. As at March an additional amount of R5 000 000 was received from Department of Environmental Affairs.

23.4 Expenditure The Fund recorded operational expenditure of R352 174 703 during 2018/19 which represents 63% of the approved

operational expenditure budget. 23.4.1 Consumables used The main reason for the underspending on consumables is the Fund’s implementations of cost containment measures

within operations.

23.4.2 Depreciation and Amortisation The Fund does not budget for depreciation and amortisation expenditure but budgets for the additions on tangible

and intangible assets.

23.4.3 Transportation costs

The overspending of R19 288 821.61 is due to increased transportation costs, i.e. higher fuel prices and the increase in the daily and kilometre rates for the use of Government Motor Transport vehicles. Further to this there was a significant increase in land based compliance efforts of officials due to the termination of a contract for the monitoring of catch landings. This required officials to perform more official trips resulting in increased transportation costs. Transport vehicles. Further to this there was a significant increase in land based compliance efforts of officials due to the termination of a contract for the monitoring of catch landings. This required officials to perform more official trips resulting in increased transportation costs.

93



23 STATEMENT OF COMPARISON OF BUDGET AND ACTUAL INFORMATION (continued)

23.4.4 Advertising costs

The underspending is as a result of Small Scale project being put on hold as a result of public consultation that need to be conductd and also the FRAP process which will only start in 2019/20 financial year. 2019/20 financial

23.4.5 Operating lease payments

The overspending is as a result of old machines being replaced with better machine upon the expiry of the old contracts.

23.5.6 Other operating costs

The overspending is as a result of legal costs that we incurred in the current year under review and the membership to international bodies.

23.4.7 Service in kind

The service in kind related to cost of employement which the Fund does not budget because the salary component is budgted by the Department of Agriculture, Forestry and Fisheries.

94


NOTES TO THE ANNUAL FINANCIAL STATEMENTSfor the year ended 31 March 2019 (continued)23 STATEMENT OF COMPARISON OF BUDGET AND ACTUAL INFORMATION (continued)

23.5 PRESENTATION OF BUDGET VERSUS ACTUAL INFORMATION

Net deficit per the Statement of Financial Performance (47 679) 18 710

Adjusted for:

Expenditure items not included in budget 27 017 27 262

Depreciation and amortisation 26 720 27 033

Movement in impairment provision for trade receivables 82 88

Bad debt write-off for the year 4 141

Foreign exchange deficit 212 -

Budgeted capital expenditure not in Statement of Financial Performance

(7 786) (10 047)

Budget (underspent)/overspent (200 423) (207 625)

Consumables used (5 863) (3 855)

Transportation cost 19 289 15 303

Advertising cost (4 614) (2 181)

Operating lease payments 211 84

Other operational costs 1 816 (39 539)

Vessel operating costs 351 (17 393)

Financial contributions (211 576) (160 008)

Finance cost - -

Chartering of vessels (37) (36)

Revenue items not included in budget (5 238) (2 582)

Donor funds revenue (767) -

Foreign exchange surplus (4 594) (106)

Other income 124 (2 476)

Revenue under/(over) budget 4 731 (29 306)

Operating revenue 15 631 4 674

Other income (3 307) (26 682)

Finance income (7 593) (7 298)

Effects of prior year invoice (18 419) 20 340

Unspent conditional grants recognised in the Statement of Financial Position

247 797 177 247

Net surplus/(deficit) per approved final budget - -

95


NOTES 2019 R’000

2018 R’000

Operating revenue 99 956 115 020

Application fees 4 689 4 674

Harbour fees 3 746 4 801

Chartering of Department vessels 1 084 -

Levy on fish products 59 143 70 299

Licenses and permits 30 527 32 976

Grant of right fee 767 2 270

Donor Funds - -

Other income 226 151 269 637

Net confiscated assest and fish products 24 871 49 286

Confiscated assets and fish products - 22 266

Net movement in confiscated inventory 24 871 27 020

Fines 1 648 20 198

Grants and other transfer payments 180 713 176 411

Donations in kind 4 594 -

Surplus from the sale of plant and equipment - -

Realisation of deferred income 13 471 22 244


Consumables used -3 702 -6 364

Depreciation -26 719 -27 033

Depreciation - computer -1 501 -1 402

Depreciation - equipment -2 097 -2 556

Depreciation - motor vehicles -451 -415

Depreciation - office furniture -1 322 -1 152

Depreciation - vessels -21 258 -21 420

Depreciation - computer software -90 -88

Travelling costs -46 073 -41 860

Advertising costs -364 -590

Operating lease payments -2 698 -2 789

Other deficits -23 -24

Other operational costs -311 589 -304 691

Audit fees -3 601 -2 384

Net write off of trade receivables -86 -229

Bad debt write-off for the year -4 -141

(Increase)/decrease for impairment provision of trade receivables -82 -88

Bank charges -140 -150

Commission paid -5 265 -5 052

Confiscation expenses -968 -918

Consultancy and outsourced services -36 783 -38 845

DETAILED STATEMENT OF FINANCIAL PERFORMANCE for the year ended 31 March 2019

96


NOTES 2019 R’000

2018 R’000

Entertainment -3 049 -53

Legal costs -29 280 -30 126

Membership fees, licenses and training -6 911 -1 412

Minor assets purchase -57 -312

Other expenses -865 -1 851

Financial Contributions -5 394 -11 151

Postage and telecommunication -10 400 -9 814

Printing -976 -1 060

Repairs and maintenance -342 -750

Service fees -1 827 -3 736

Subsistence -26 576 -28 586

- International -2 266 -2 371

- Local -24 310 -26 215

Vessel operating costs -179 069 -168 262

Operating profit for the year -65 061 1 306

Foreing exchange (loss)/surplus 106

Finance income 17 593 17 298

Finance expense

Surplus/(deficit) for the year -47 468 18 710

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